The offering to sell 9.84% in Petrom, which may amount to EUR610 million, is the largest transaction in the history of the Bucharest Stock Exchange, but also the largest privatization managed by the Emil Boc-led government.
The future development of the capital market in Romania, as well as the schedule of future privatizations of the state, depend on how this sale ends. This transaction is a way to test the market and see if the investors’ wallets are ready for the listing of the ‘crown jewels’ Romgaz and Hidroelectrica.
This is why the talks between the governmental committee and the consortium brokering the offer, led by the Russians at Renaissance, were intense and extended into Thursday. The two parties tried to find the best solutions to have the offering make as much money for the state as possible and at the same time be alluring to investors.
The government’s main goal when the offer ends is to be able to say it got a better deal than the Nastase Cabinet, which transferred control over the company to the Austrians at OMV in 2004 for EUR669 million.
The approach to the sale is a first for the Bucharest Stock Exchange: a maximum price announced of RON0.46/share and the allotment of the shares based on price and the time of subscription (first come, first serve). There are two chunks to the offer, 15% earmarked for retail investors and 85% for institutional investors. A price will eventually be set for each tranche separately and then the allotment will follow.
This allotment method would enable an investor to buy the whole block set aside for major investors (8.3% of Petrom), if it subscribes the entire stake at the maximum price at the beginning. The investment required is EUR518 million. Such a thing could cause dissatisfaction on the market, which the government tried to avoid.
A RON0.46/share price might turn out to be interesting for the major investors looking for a way into the Eastern European market, such as the Asian sovereign funds or some oil companies. Buying such a stake on the bourse would drive share prices much higher and is virtually impossible now. Petrom was trading for RON0.405 yesterday.
Another challenge for brokers is to find enough buyers for the small investor chunk, worth EUR91 million at the maximum price. Local brokers of the offer (BT Securities, EFG Eurobank Securities and Romcapital) rely on a network of 470 branches, some of which part of the Banca Transilvania, Bancpost and CEC networks. If the tranche is not fully subscribed, the remaining shares should go to the institutional investor block.