OREANDA-NEWS. June 22, 2010. The anticipated deal between Aeroflot and Rosavia, within which Aeroflot will acquire 6 state-owned airlines currently under the management of Rostechnollogii, will be executed differently than had been planned, according to Igor Shuvalov. Previously, a swap of shares between Aeroflot and the Federal Property Agency had been the company’s base case. Now, according to Shuvalov, the deal will involve a swap of Aeroflot’s newly issued shares in exchange for airline assets. The deal will take place directly between Aeroflot and Rostechnologii, without participation of the Russian government, reported the press-centre of OTKRITIE Financial Corporation.

View: We view this news as slightly positive for Aeroflot, mainly because Rostechnologii will not obtain a controlling stake in Aeroflot (as was suggested by Rostechnologii previously), since Shuvalov said that the stake will be small.

Valuation and Action: Aeroflot trades on a 2010E EV/EBITDA of 5.9x, which implies a 30% discount to EM peers. We reaffirm our BUY rating for the stock.