A Greek-based consortium has offered to pay € 11.1 per share for an 18.3% stake in Elektroprivreda Crne Gore (Bloomberg: EPCG ME), the firm’s privatization committee stated on Friday. A competing bid of € 8.4 per share was placed by Italian-based A2A. The Italian company already owns 15% of EPCG after purchasing a stake on the market from minority shareholders in May 2009. However, the highest bid was placed by two Greek companies organized as a consortium, and this bid is likely to be accepted by the Montenegrin government. Price was one of the main criteria for the decision, a top government official said. It has not yet been revealed whether either of the bids are binding or conditional offers. The winning company will be obliged to take over the remaining minority at the same price offered to the government within a month. The Montenegrin government expects to obtain € 253m from the deal, which will represent a significant financial injection for the country’s budget.
Our view:
We expect a significant positive market reaction to the news. Both companies offered surprisingly high prices for the minority stake, which will be obtained via a capital increase. Although EPCG has posted significant losses in the last three years, strategic investors appear to be very confident about the utility firm’s potential. EPCG holds a monopoly in the production and distribution of electricity in Montenegro. The company’s stock currently trades at € 7.5 and the highest bid stands at a 48% premium to this price. We expect a sharp price increase on the market but no heavy trading of the stock, mainly because the winner of the tender will be obliged to offer minorities the same price it offers the government.