Poland’s Azoty market cap slumps on jitters over Compo Expert deal

12 October 2018 17:16 Source:ICIS News

LONDON (ICIS)--Poland’s Grupa Azoty market capitalisation has fallen by around zloty (Zl) 1bn ($269m) in the past month on the back of investors’ unsettlement by the company’s acquisition of German specialty fertilizers firm Compo Expert.

The Polish chemcials and fertilizers major Azoty announced the intended acquisition, for a maximum price of €235m, in early September, but investment bank Raiffeisen Centrobank (RCB), as well as other chemical equity analysts have pointed out that Azoty had not disclosed the amount of Compo Expert’s debt it would be taking on as part of the transaction.

Azoty’s shareholders approved the acquisition plan on Friday.

By the end of Friday trading, Azoty’s share price on the Warsaw Stock Exchange (WSE) stood at Zl 26.60, compared to the day’s opening price of Zl 27.92 and the 5 September price of Zl 37.00.

“[We’ve received] some additional information about [Compo’s] EBITDA [earnings before interest, taxes, depreciation and amortisation] for the last four quarters, but no information about the debt of the company has been provided to investors,” RCB analyst Dominik Niszcz said to ICIS.

“So, it is still difficult to fully assess the price paid – either we compare net profit with equity price or we compare enterprise value with EBITDA, but the company only presented EBITDA and the equity price.”

Noting Azoty’s market cap drop was similar to the price it is paying for Compo, Niszcz noted thtat the stock below the Zl 27/share barrier would indicate a decline in part attributable to Compo, but also to growing natural gas prices and worsening global market sentiment.

“The acquisition in Germany has been likely taken negatively by investors as during just four trading sessions in September the stock declined from Zl 37 to Zl 31, after the release of the acquisition information, which could be a good approximation of what value investors assigned to the deal,” the analyst said.

In a written response provided to ICIS after RCB first raised concerns at the lack of information on debt in the deal, Azoty said “debt ratios will increase, but in the scope” of the company’s financing plan.

Compo Expert Group markets itself as a leading independent global manufacturer of high added-value specialty fertilizers for professional use in the markets of Asia, Europe, the Americas and South Africa.

The company's key production assets are located in Krefeld, Germany, and Vall d'Uixo, Spain.

The Compo Expert product portfolio includes advanced solutions for controlled release fertilizers (CRF) and slow release fertilizers (SRF), fertigation and foliar fertilizers, liquid fertilizers and biostimulants, as well as specialty nitrogen, phosphorous, potassium (NPK) fertilizers with a high nutrient concentration.

($1 = Zl 3.72)

By Will Conroy