ENRC, Suleiman Kerimov and the Sunday Times KAZ piece

Suleiman Kerimov

It was with a little wry smile that I read the Sunday Times piece on Kazakhmys this last weekend whilst enjoying the sunshine. Danny Fortson has also now alerted his readers to the completely nonsensical valuation that we have banged on about on this blog for the last 3 months. We will not regurgitate it again and simply point readers to the blog tab on the right to see the arguments we have put forth that the stock price is around 200-300p wrong in our opinion.

What is intriguing to us is just where Suleiman Kerimov now sits with his circa 3% of ENRC. His average is around 270p and I do not buy the angle that he bought the stock (a) to help out the oligarchs and/or (b) he was looking for additional negotiation room at the table given his holdings in the banks that are to finance the takeover (VTB & Serbank). The very lack of additional purchasing in recent weeks by him tells us that he has now “been brought inside” and is likely to be jostling for his own and by default the minorities position. The news that he had written to the Board of ENRC pushing for a price of 400p makes clear that he sees the current proposal as woefully undervaluing ENRC.

Should the deal go ahead (and with a 2nd extension recently granted and the SFO continuing to breath down the 3 oligarchs’s necks it seems almost inconceivable to us that it does not), Kerimov will wind up as a shareholder in KAZ. As the Sunday Times pointed out, should the bid level be increased towards the 300p level for ENRC then the cash receipt will transform KAZ’s balance sheet and the stock cancellation be materially EPS enhancing. In the even that Ekibastuz is sold for north of £1bn, what is a nonsensical valuation presently for KAZ becomes, in our opinion, the bargain of this cycle. If I were Kerimov, I’d be seriously sliding my rule over KAZ if the re-rating does not transpire on the ENRC bid conclusion.

We are in and adding to our Kazakhmys position today on the shakedown in the wider market.