OREANDA-NEWS. September 30, 2010. Synergy plans to sell 2.9m new shares at USD36- USD 40 per share, media reported yesterday. Sword Enterprises, one of Synergy's shareholders, agreed to sell its stake (around 15%) and use the proceeds to buy new shares. The books opened yesterday and will close on 4 October. The company has not provided an official press release, reported the press-centre of OTKRITIE Financial Corporation.

View: Synergy could raise USD 104- USD 116m. According to 6M10 financial results, the company has to pay off around USD 82m of debt over the next 12 months. The proceeds of the share sale will likely be used for debt repayment and the acquisition of new brands. The management had confirmed during a previous conference call that the company has an option to buy the Veda vodka brand (premium), which in price terms sits between Myagkov (sub-premium) and Beluga (super-premium).

Valuation and Action: The stock currently trades at a 2011E EV/EBITDA of 7.8x – a 56% discount to EM peers. Yesterday the stock reacted negatively to the news, but we do not expect a massive sell-off due to the significant discount on 2011 multiples.