Top Russian mobile operator MTS announces $86.5mn share buyback

Top Russian mobile operator MTS announces $86.5mn share buyback
/ bne IntelliNews
By Ben Aris in Berlin April 30, 2024

Russia’s biggest mobile phone operator MTS is offering its international investors whose shares have been blocked inside the country due to sanctions-related restrictions imposed in 2022 an opportunity to sell their shares at a discount and get a return on their investment, the company said in an emailed statement to bne IntelliNews on April 30.

MTS is following in the footsteps of the country’s largest supermarket chain, Magnit, which completed a series of successful buybacks from foreign shareholders in 2023.

MTS said on April 27 that its wholly owned subsidiary Stream Digital LLC is making a tender offer to purchase up to 4.2% of the company’s common shares at RUB95 ($1.03) apiece “to provide investors additional options to exit their investments in MTS.” That offer represents a roughly 65% discount to the weighted average price of MTS shares over the last six months. The company’s closing share price on the Moscow Exchange on April 26 stood at RUB310.

The buyback is for a maximum of 83,932,026 shares worth RUB7.97bn ($86.5mn). The company said that if the total number of shares tendered will be higher, they will be purchased on a pro rata basis. MTS said it will finance the buyback with its own funds and will “maintain a comfortable net debt leverage level” following the deal’s completion.

MTS, long one of Russia’s most popular blue chips among international investors, is one of the country’s biggest companies outside the energy and natural resource sector. The company has over 81 million mobile subscribers in the country and boasts more than 4,400 retail outlets.

Capital market restrictions imposed in Russia in response to Western sanctions have made it virtually impossible for some foreign investors to exit from their Russian investments. MTS said its tender offer had to receive special approval from the Russian government commission that oversees foreign investment. The purchase price was set in accordance with the commission’s decision and is in line with the existing practice of buying Russian assets from foreign investors at steep discounts. A number of foreign companies faced discounts of 80% or more to exit from their Russian investments amid strict regulatory limitations.

While the tender offer is addressed to all holders of MTS common shares, it could be of particular interest to foreign investors whose assets have been effectively frozen on so-called type-“S” depo accounts. As part of the transaction, they will be given the first opportunity to sell their shares since 2022. The buyback “will grant shareholders whose rights have been restricted an opportunity to dispose of their shares partially or fully,” the company said.

To make the deal more attractive to a wider group of foreign shareholders, investors will have the option to receive payment for their shares in US dollars, euros, Chinese yuan or UAE dirham, in addition to the ruble.

Investors will have until May 28 to tender their shares, with the deal expected to be completed around June 20.

Following a similar buyback from Magnit in 2023, the deal announced by MTS marks the second time since Russia’s invasion of Ukraine that global portfolio investors have been given an option to exit from a publicly traded Russian company.