Ukraine saw one of the most non-transparent privatizations in its history yesterday when the State Property Fund sold its 99.6% stake in Odessa Port Plant for UAH 5 bln to Nortima Ltd, a pool of Ukrainian investors. Immediately after the completion of the auction, the privatization commission claimed that it was not satisfied with the selling price and did not acknowledge Nortima Ltd. as the buyer. This move created a tense situation, in which Nortima may theoretically prove its right to the Odessa Port Plant in Ukrainian courts and introduce its management at the plant, even without receiving the shares of the company from the State Property Fund and without actually paying for them, which resembles a raider scheme rather than a transparent privatization. In this situation, the outright loser would be the state budget, which may never see the UAH 5 bln from the plant’s privatization. At the same time, the government may lose control of the asset, which is clearly NEGATIVE.

On the positive side, it should be mentioned that the “selling” price of Odessa Port Plant may serve as a good benchmark for valuation of its Ukrainian peers, especially Stirol. Assuming a 30% premium for a controlling stake of Odessa Port Plant and the estimated value of its transshipment terminal of $135 mln, the selling price of pure nitrogen fertilizer producing facilities may be estimated at $345 mln, which is 93% higher than Stirol’s current market cap of $179 mln. Thus, the sale of Odessa Port Plant was made at a 93% premium to Stirol’s price, which assumes a convergence of Stirol’s share price to the settled benchmark, as the two companies have comparable production facilities and production efficiency. We saw this convergence already in Monday’s trading, when Stirol shares jumped by more than 30%. However, the future movement of its shares depends on how the dispute over Odessa Port Plant develops.