IC Market Espresso 26 Nov 2019

Kraš Share Price Significantly Drops After MI Pivac Acquires Shares of Kraš ESOP

The market reacted yesterday to the weekend’s news with a share price decrease of 31.43%.

On Saturday (23 November 2019), Mesna Industrija Pivac published an announcement on their website stating that they have signed a Sale and Transfer Agreement with Kraš ESOP, through which they acquired an additional 18.45% stake in Kraš.

The market reacted yesterday to such news, resulting in a share price decrease of 31.43% (on a turnover of HRK 2.6m), with it closing at HRK 720 per share.  Such a decrease could have been expected since after the mentioned acquisition MI Pivac obtained a majority voting stake in the company (MI Pivac has a 49.16% stake in Kraš and 51.8 % of voting rights due to 5.1% of shares in treasury). Such a large shareholding supposedly reduced the interest of other buyers to aggressively bid on the market.

Namely, it appears that Kappa Star Limited (which has been acquiring large volumes of Kraš for quite some time), removed their bid from the market, or at least at levels we have seen in the past weeks. Before the Friday’s market close, Kraš’ order book had the first bid on HRK 1050 per share for a volume of roughly 40,000 shares. After the weekend’s development such levels were not present on the market which consequently led to such a steep share price decrease. As a reminder, Kappa Star Limited is currently the 2nd largest shareholder of Kraš owning 25.82%.

Kraš YTD Share Price Performance

As stated in our yesterday’s flash news, MI Pivac, Kraš ESOP and Sindikat PPDIV also signed the Agreement on social partnership, through which additional obligations of Pivac were defined (such as: confirming their further investment in development of Kraš, the continuation of respect and protection on the level of employee rights and maintaining production facilities at the existing locations).

According to the media, with the above-mentioned agreement MI Pivac obliged themselves not to cut salaries for the next 10 years. This seems to be the crucial reasons for the sale and transfer agreement between MI Pivac and KRAŠ ESOP, as ESOP is represented by the workers of Kraš.  The media further states that Kappa Star Limited allegedly offered HRK 869 per share to Kraš ESOP, however without the mentioned wage safety of the workers. Therefore, it would be left unknown whether Kappa Star Limited would want to cut wages or reduce the head-count.  

Management Board of Đuro Đaković Specijalna Vozila Steps Down

The mentioned resignation shall take effect on 12 December 2019.

Đuro Đaković published an announcement announcing that the Bartol Jerković (CEO) and Darko Grbac (Board member) stepped down from their positions at Đuro Đaković Specijalna vozila. The mentioned resignation shall take effect on 12 December 2019.

For such a decision, the management board gave the following comments:

Once the problem was identified regarding the absence of continuated financing of wagon production, the company faced a difficult situation in realizing active contracts. The management tried to find new solutions immediately in order to secure a credit for sustainable financing production. Credit was secured which ensures full employment over the next 18 months. As the board was faced with the absence of a general financing solution for active and contracted production, they developed several models in September for the inter-financing of the completion of over 100 wagons in high production stages. The mentioned credit would be repaid by the end of 2019 and would serve as a pathway towards a stable credit framework.

However, the board states that after several months of intense activities, no suitable solution was found. As a result, for the first time in 15 years, the company was unable to pay salaries and had their accounts frozen. At the same time, the Đuro Đaković Specijalna vozila is becoming increasingly exposed to the workers departing from the company. Besides that, the company states that they are exposed to the constant risk of termination of contracts by their prime EU buyers.  

As the board deems that the situation in the company in critical and can not be resolved by the management board alone, they decided to resign.