Stock That Tanked After ‘Shocking’ Tesco Deal Soars Most in Year

  • Tesco Kipa rises 20% after losing half its value in 4 days
  • Investors bet that regulator will demand mandatory share call

Tesco Kipa ended a selloff that wiped out more than 50 percent of the stock’s value, on optimism that Turkey’s market regulator will protect minority shareholders’ rights.

The Izmir-based company, which is the target of a takeover, jumped 20 percent, the most in a year, to 1.45 liras. Traders exchanged 84 million shares at the close in Istanbul, more than any other day since November 2003. The stock’s trading volume and percentage gain were the highest among the Borsa Istanbul 100 Index’s members.

The advance offers some relief for the investors who together own 4.5 percent of the company’s shares, and who endured the stock’s worst four days in more than a decade through Tuesday. The declines were triggered by Tesco Plc’s plan to sell its 95.5 percent stake to Migros Ticaret AS. The deal is worth 302 million liras ($103 million), according to Migros, well below the company’s market capitalization of 3.1 billion liras as of Thursday.

Coupled with Migros’ intention to apply for an exemption from a mandatory share call, the stock that investors thought would be a safe bet because of its connection with one of the U.K.’s biggest companies turned sour. An exemption would deny minority shareholders the right to sell their holdings according to criteria set by the market regulator, which may be higher than the one implied by the acquisition deal.

“Investors may be buying today on the belief” that the market regulator will protect their rights, Arif Unver, the head of Turkey’s Capital Market Investors Association, said by telephone from Istanbul on Wednesday. The request for an exemption “would not be rational,” he said on Monday.

Fair Share

The criteria for a share call is either the weighted average market price over a specified time, or one set by an independent appraisal report, or the price in the acquisition deal, whichever is highest. The Capital Markets Board hasn’t received an application for an exemption from Migros yet, an official said by telephone.

“I’m not looking for profit any more, but I just want the mandatory share call to be made and get my fair share,” said Dogan Sar, a 50-year-old engineer who bought Tesco Kipa shares more than a year ago with the understanding that it’s supported by one of the world’s biggest supermarket chains. “If Tesco gave its stake to Migros for free, would that mean our shares are worth nothing too?”

Hidden Value

In a statement after the deal was announced, Migros said it will own 168 stores and 26 shopping malls owned by Kipa. “We’re becoming one of Turkey’s biggest shopping center investors,” Migros Chief Executive Officer Ozgur Tort said in the statement.

“Minorities need to just wait,” Jak Esim, a musician who first bought Kipa shares about three years ago, said by phone on Tuesday. His expectation was that the company’s “hidden value,” such as the property it owns, would be unlocked at some point. “I’m going to wait until the end of this process. The balance sheet does not reflect the real value,” he said.

Sustained Investment

Kipa is the smallest of five central and eastern European businesses that Tesco operates. Revenue at the unit has fallen for three consecutive years amid fierce competition. Kipa would have required sustained investment to better compete, Tesco said Friday. The Turkish hypermarket operator is officially known as Tesco Kipa Kitle Pazarlama Ticaret ve Gida Sanayi AS.

“I was shocked when I saw the deal price,” Serkan Sinlik, a private sector worker who bought the stock at 2.45 liras, said by phone on Wednesday from the southeastern Turkish province of Adiyaman. “And with the shares bottoming for three straight days, we didn’t even have a chance to exit,” he said, adding that he won’t sell until there’s clarity on the mandatory share call.

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