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Reuters: The instability of the markets may affect the privatization programme of Romania
The nervousness of the markets and the high price of 840 million dollars required by the government for Petrom shares could affect the ambitious programme of privatization, Reuters says, quoted by Mediafax.. Romania put on sale 9.8% of Petrom, the biggest transaction made ever at BVB but the target price is almost 20% over the market level.
“The market is established by the buyier, there is much instability. If Italy explodes, there is the possibility the share is not sold” a source close to the transaction said, adding that there is demand, but it is very sensitive to price.
The countries in emerging Europe, led by Poland and Russia try to sell state assets to consolidate public finances and draw investments and foreign experience in local industries. Romania acted later for fear not to make layoffs and was left with inefficient assets that swallow annually hundreds of million euros. The government pledged to accelerate privatizations, in a new precautiory agreement of five billion euro, agreed with IMF.
Investors follow the situation in Greece which wants, under the pressure of international creditors to sell shares in state companies, privatization to get 50 billion euro by 2015. Unfavourable economic perspectives will make investors reluctant to the required prices. The leu reached this week the most reduced level of the last seven months, and the shares depreciated at BVB due to the worries caused by the crisis of sovereign debts in Europe.
This means that Petrom is an essential indicator of the agreement and the demand of investors for other tradings, among which the sale of shares in Transelectrica and Transgaz and the public bid for Romgaz.
OMV is the majority shareholder of Petrom where the government owns 21% of the titles. The sale is managed by Renaissance Capital, EFG Securities, BT Securities and Romcapital.
“There are two options, either they sell under the market price, or they won’t do it and will postpone the transaction” Ovidiu Fer, analyst with Wood&Co says. He added that if Petrom shares are not sold, it will be a bad signal for other future privatizations,as the state is unrealistic as regards the price, or the interest of the market for risky placements is reduced.
After dropping salaries and VAT increase to reduce the budgetary deficit, the sale of state assets will show the commitment of the government to observe the new agreement with IMF, the article shows.
For Fondul Proprietate which owns a share of 20% of Petrom and other listed or non-listed companies, the sale of Petrom is a tested case for the whole programme.
“What we want is the trading to be a success and perceived as such in Romania, as it would be easy for the government to go on with other offers” the manager of Fondul proprietatea Grzegorz Konieczny said. The maximum price for the bid for Petrom is 0.46 leishare, a total of 2.56 billion lei ( 838 million dollars) compared to the quotation of 0.389 leiunit at the closing of Wednesday.
The government could announce the minimum price next week
“It should go. I don’t expect a crazy success, but they will do it. I think the sale will take place with a certain discount” Matei Paun stated, partner in BAC investment bank in Bucharest.
Petrom shares appreciated with almost 15%this year, over the advance of 3% of BET indicator of the most 10 liquid shares. The market share of Petrom, of 7.2 billion dollars, is the highest in Romania.
The Petrom bonds are traded at eight times the estimated profit for 2012 in conformity with STOXX indicator 600 Oil and Gas, benefitting from the reduced level of debts, operations of exploitation and production of hydrocarbures and solid management.
The majority of analysts recommend the keeping and buying of Petrom shares. The negative factors are the operational risks in Romania, impredictible policies respectively, the slow economic relaunching, the instability of the foreign exchange rate and reduced liquidities of buyers.
“There will be some who will oversubscribe, but the majority of bids will be of 0.33 – 0.35 lei, under the required price” Fer from Wood&Co. says.
He added that the government should sell with discount, of almost 10% under the market price.