4 Sep 2023 13:34

Ukraine's Kernel raises $60 mln with share issue

MOSCOW. Sept 4 (Interfax) - Ukrainian agricultural holding Kernel has raised almost $60 million with an additional share issue.

"As a result of the placement, gross proceeds of $59.983 million were received from several qualified investors - existing shareholders of the company who participated. The participants in the offer will be included entered in the company's register of shareholders no later than Monday, September 4," Ukrainian media reported, quoting a Kernel stock exchange filing.

In total, 216 million shares were placed at a price of $0.2777, while until now there were 84,031,230 shares in circulation. They traded at PLN 11.02 or $2.66 on the Warsaw Stock Exchange on Friday evening.

The new shares will not be admitted to trading on any stock exchange, Kernel said.

"The additional share issue turned out to be a big con, as expected. It was 100 times cheaper than the book value of the company, 20 times cheaper than the annual profit and 11 times cheaper than the closing price today [September 1]," said Ukrainian investor Pavel Boiko, founder of Gonzo Invest, who in his time got Ukrainian courts to rule in his favor in a dispute over a squeeze out at Metinvest's Avdeyevka Coke and Chemical Plant.

"Now there'll be litigation, a media war and discussions at the same time," he wrote in a specially created group for minority shareholders.

Kernel's share price fell 17.6% to PLN 9.08 per share or about $2.2 on the results of the share issue when trading on the Warsaw Stock Exchange opened on Monday. The shares were down to PLN 8.6 after 10 minutes, then corrected up slightly before falling again. In total, deals for 77,850 shares worth PLN 1.66 million or $0.4 million were struck in the first 30 minutes.

Shares in Kernel fell 6.4% on the Warsaw Stock Exchange on August 28, the last day for bids in the $60 million share offering, and 20.2% in the week since the announcement of the offering. They are currently at their lowest since the company's IPO in 2007, when the shares were sold to investors for PLN 24 each.

In the prospectus for the new placement, Kernel allowed the sale of up to 216 million new shares, which, together with other terms of the offer, led minority shareholders to suspect that majority shareholder Andrei Verevsky was trying to dilute their stake.

Gonzo Invest's Boiko at the time sharply criticized the actions of the majority shareholder and CEO of Kernel, Verevsky and called on minority shareholders to join forces to resist the possible dilution of shares as a result of the share issue and subsequent squeeze-out. However, he said on August 29 that he had initiated negotiations with Verevsky, which should take place in September, and would not be making any abrupt public or legal moves against Kernel until then.

It follows from the information in the specially created groups that all requests by small investors to buy shares from the additional offering were rejected, since it was only open to qualified investors, but private investors hope to use that refusal in subsequent complaints against Kernel to financial regulators and courts.

As of July 31, Kernel had $1.445 billion in interest-bearing debt - bank loan principal and Eurobonds, excluding accrued interest and leasing obligations - as well as $1.148 billion in cash and equivalents and $327 million of inventory.

Kernel is a major producer and exporter of sunflower oil. In addition, it is engaged in the cultivation and sales of agricultural products.

The largest co-owner of Kernel is Ukrainian businessman Andrei Verevsky via Namsen Ltd. This year, Verevsky, as part of the buyout and delisting of the agricultural holding from the Warsaw Stock Exchange, increased his stake in the holding from 41.3% to 74.05%.