7 Mar 2023 16:57

Majority shareholder of Ukraine's Kernel says no value in shares remaining listed on Warsaw Stock Exchange

MOSCOW. March 7 (Interfax) - Andrei Verevsky, the majority shareholder and chairman of the board of directors of Kernel, one of the largest Ukrainian agricultural holdings Kernel, thinks there is no value in Kernel shares remaining listed on the Warsaw Stock Exchange.

Verevsky owns about 38% of the holding's shares through Namsen Limited. "Namsen informs the board of directors of the company about the intention of Namsen to delist the company and to launch a delisting tender offer to invite the remaining shareholders to sell their shares in the company for the purposes of the potential delisting of the company's shares," Ukrainian media quoted a letter from Namsen, published in a stock exchange filing, as saying. Namsen also requests the board to make the respective decisions.

Namsen has come to the conclusion that the disadvantages, from a strategic, commercial and cost perspective, resulting from the listing of the company's shares on Warsaw Stock Exchange outweigh the relative advantages of being a public traded company. In addition, during the company's IPO in 2007, the shares were offered to investors at PLN 24 per share, which is higher than their current price offered at the time of delisting, and well below the Kernel share price for most of its existence, which has fluctuated between PLN 40-70 per share.

Simplified access to capital markets was the main incentive for the decision to go public back in 2007. The company successfully used this channel three times thereafter: in 2008, 2010, and 2011 to finance its growth. "But since then, the situation has totally changed, and during the last 11 years Kernel has never raised equity via public offerings to finance the growth of the company and its subsidiaries."

Numerous attempts to improve stock visibility and widen shareholder base over the past decade via regular communication to the market, participation in capital market conferences, non-deal roadshows and material investments into investor relations development and marketing barely translated into any visible improvements.

Additionally, due to the consolidation of the pension funds market in Poland, Namsen observes a decreasing number of shareholders, who would like to extend their position in Kernel. During the latest EGM held in September 2022, it was proposed to the shareholders to create the authorized share capital to enable company to raise promptly the emergency equity funding if needed while debt capital markets remain closed for Ukrainian issuers, but a significant majority of minority shareholders voted against the authorized share capital.

"It is our understanding that many shareholders are not willing to support the company with cash injections and have short-term speculative interest in the stock rather than long-term strategic view on the company," Namsen said.

Taking the company private would enable management to concentrate 100% of their time and resources on the execution of the "strategic plan serving the true interests of the company as well as explore new strategic opportunities and sustainable growth."

According to Luxembourg law, the decision to delist the shares should be taken by the Board of Directors. Passing a delisting resolution by EGM is not applicable.

Namsen, which owns 31,974,011 shares in Kernel, said in a separate letter to the board of directors that is planned to call a tender offer to repurchase 52,057,219 shares for at least PLN 18.5 per share in a transaction brokered by Trigon Dom Maklerski S.A.

The Luxembourg-registered Kernel Holding SA was listed on the Warsaw Stock Exchange in November 2007. Its market capitalization is now PLN 1.64 billion or $372 million.

The share price has fluctuated between PLN 16.55 and PLN 36.5 per share in the last 52 weeks.

The shares fell 3.94% in the first 40 minutes of trading on March 7 to PLN 19.48 following news the core shareholder plans to delist and buy out minority shareholders.

Kernel, Ukraine's largest producer and exporter of sunflower oil, saw its net profit fall 12.6% year-on-year in the first half of the 2023 financial year from July to December to $370.31 million. Revenue decreased 41.3% to $1.89 billion.

Kernel was the largest agricultural holding in Ukraine in 2021 with a land bank of 510,000 hectares, however, at the end of April 2022, its board of directors decided to sell 134,000 hectares of cultivated fields to the main shareholder Verevsky for $210 million in a bid to mitigate business risks and improve medium-term liquidity. The holding's current land bank is 376,000 hectares.