JPM: Отмена слияния ФСК/МРСК позитивна, но акции МРСК Холдинга останутся под давлением

FSK and MRSK merger has been cancelled; President Vladimir Putin cites objections of minority shareholders in both companies as one of the reasons for the decision. We believe that the decision should be positively taken by the market. At the same time we believe that MRSK Holding stock price will be under pressure in the next several months due to the announced RUB36 bn share issue.

 FSK and MRSK merger has been cancelled according to statements by Energy Minister Alexander Novak. The decision on the cancellation of the merger was taken at a meeting headed by Vladimir Putin according to Kommersant.
 President Putin mentioned that changes in the segment should be done in a way which would be taken positively by minority
shareholders. It should help to improve the investment attractiveness of the sector. The initial market reaction to news of a potential merger of FSK and MRSK Holding back in May 2012 has been negative in our view.
 A single management company will be created instead of the merger, according to the news. The proposal of a single management company which would manage both FSK and MRSK Holding instead of the state itself looks like a compromise between proposals from Rosneftegaz and the government.
 At the same time MRSK Holding plans to launch a share issue in favor of the state, which is likely to put pressure on the share price.
The issue has been planned since last year in order to finance renovation and construction of infrastructure in St. Petersburg, Sochi and North Сaucasus regions (via share issues in Lenenergo, Kubanenergo and MRSK North-Caucasus). Yesterday the BoD of MRSK Holding approved a RUB2.16/share price for the share issue, which is the 2-month average, according to Interfax. The BoD recommended that the EGM approve a charter capital increase by 16,885mn common shares (35% of existing common shares), according to the news. The EGM will be held on 13 November 2012 in absentia. The cut-off date for participation was reportedly set at 8 October 2012. The company has not yet made an official statement about the details of the planned share issue.
 We believe that FSK may outperform MRSK Holding in the short term, as though the news on the cancellation of the merger is positive for both companies, MRSK Holding shares are likely to be under pressure, due to the launch of the new share issue.