Updated April 21, 2008

   Grain-processing holding Pava prepares the secondary public offering (SPO) and plans to hold it at the London Stock Exchange. The French bank BNP Paribas was chosen as an underwriter. The agro-holding with the annual turnover more than $100 million can attract around $33 million within SPO. Pava becomes the third Russian agro-holding after Razgulay Group and Arkada Group of Companies planning the offering in the heat of the world liquidity crisis: the investors pay great interest to this sector companies over the high prices for crops.

   A source aware of the offering reported the Altay agro-holding Pava prepares SPO at the London Stock Exchange (LSE). According to him, the company has chosen the French bank BNP Paribas as an underwriter of the offering. "In the nearest future the holding stockholders will be offered to approve the 30-percent additional emission of stocks, which is planned to place no later than the 3Q this year", he reported. Pava vice-president Sergey Stolbov confirmed that SPO would pass by the 3Q end this year, and BNP Paribas was chosen as a financial consultant. "BNP Pariba does not have such a client", reported the bank representative Julia Molchanova. A source says that Pava could become the client of one of the European BNP Paribas offices. According to Mrs. Molchanova, the bank headquarters in Paris refused to comment.

   Pava holding enters the top five of the largest Russian grain-processing companies and it has been the first among these market players to hold IPO in March, 2005. It has placed 10,53% stocks at RTS and MICEX and has attracted $8 million. The company turnover totaled $102,95 million in 2007, EBITDA was $8,84 million. Chairman of directors’ board Andrey Igoshin owns 44,44%, and member of directors’ board Pavel Igoshin – 45,03%.

   By the norms of the Federal Financial Markets Service 30% of the additional emission should be placed at the Russian floors, the rest could be sold abroad, as BrokerCreditService Investment Company analyst Tatyana Bobrovskaya marks. "If the core Pava stockholders did not exercise the preemptive right of repurchase, the 7,95 million stocks of the additional emission should be placed in Russia, the rest – 18,5 million – at LSE", she says. According to her calculations, as a result of SPO Pava’s free-float will up from the current 10,53 to 31,2% from the increased book value, and the stake of the main stockholders will reduce to 68,8% stocks. According to the estimations of Solid Financial Company analyst Yevgeniya Talalaeva, Pava can attract $33 million minimum within SPO. Pava stocks have been traded for $1,25 per security at MICEX, the company capitalization has totaled $111 million.

   Within the last half-year OJSC Pava was the third Russian agro-holding got interested in the offering at the open market. Razgulay Group has been planning to consider the offering of another additional emission within the stockholders meeting after it had held SPO in November, 2007. The management of another large player – Arkada Group of Companies – has also declared about the plans to hold IPO. "The favorable situation at the grain market permits expecting the companies will be estimated without a discount", says Razgulay financial director Dmitry Tukhtenko. He also marks that additional offering at LSE is more favorable as the western investors estimate the agro-companies by 12-15 EV/ EBITDA multiplier, and this index does not exceed 6,5 in Russia.

   Institution investors pay great interest to the companies of the raw material sector. The global IPO market has shown the sharp – by 60% – activity decline in 1Q, thus the companies of financial and raw material sectors have kept the leadership by the offering number – 50% and 26% respectively is said in the Ernst & Young report. "Grain prices that have upped by 60% within a year have influenced the high demand for the securities of the raw material companies", states Sovlink analyst Pavel Zhavoronkov. "Swedish Black Earth Farming Ltd that owns the land assets only, and almost half of them is in Russia, has hold the offering in March and investors have estimated it at $1 billion". "Razgulay shows the vivid example also. It has successfully held SPO in November and its stocks have demonstrated the good growth – more than 50%", marks Tatyana Bobrovskaya. "Pava has the positive dynamics also, as in September its stocks were bought for $0,65, and now – for $1,25".