The association of minority shareholders announced yesterday they might consider taking legal steps against Unipetrol, if the company will divest two of its subsidiaries (synthetic rubber maker Kaucuk and PVC producer Spolana) for a price, which is less than CZK 6.5bn (US$ 286m). The Deputy Chairman of the Association of Minority Shareholders, Mr Michal Golias said that if the Spolana sale raises less than CZK 1.5 bn and the Kaucuk sale less than CZK 5 bn, they would see the company damaging shareholders' investments.
Our view: Since Polish chemicals company Dwory reportedly offered CZK 4bn for Kaucuk, there is an increasing chance for an action of minority shareholders. Since the offer values the company 14.1 times of our 2006 net profit estimate, and exceeds our DCF based fair value estimate (CZK 2.6bn) by 55%, we do not think that Unipetrol is going to make a bad deal. In case of Spolana, CZK 1.0-1.2bn seems to be a realistic price for 100% of the equity.Moreover, disposal of the non-core assets should be welcomed if Unipetrol reinvest money at higher return businesses (such as refining). Therefore, we consider the potential protest of minority shareholders association as a risk factor.