According to the newspaper, it had obtained a notice to Euroset's creditors stating that on April 10, 2007, the general meeting of participants of LLC Trading House Euroset decided to reorganize by converting into an OJSC. Euroset President Eldar Razroev declined to comment on the goals and timing of the reorganization.
At that time, Euroset had more than 5,200 stores in 1,200 cities across Russia and in 11 CIS countries. The company's turnover in 2006 was $4.6 billion, revenue $3 billion, EBITDA $116 million, and net profit $22 million. The company was 100% owned by the Dutch Euroset Holding, whose owners were Yevgeny Chichvarkin and Timur Artemyev. Analysts estimated the company's value at around $2 billion.
Plans for the Exchange
The company's management scheduled the share offering for the following year. In January, Euroset co-owner Timur Artemyev outlined intentions to hold an IPO in 2008 on the RTS and, "if possible, on the London Stock Exchange." He predicted that the size of the offered stake could be around 20–25%.
Market participants linked the change in legal form to preparations for the offering. "Euroset's desire to change its legal form is quite understandable and expected," said Alexei Chuikin, CEO of the Dixis group of companies. "When going public, maximum transparency and openness are required, which is precisely what operating as an open joint-stock company implies."
Risks of the Conversion
Experts pointed to technical risks. Anton Bogatov, chairman of the board of directors of Nekster Investment Company, said that any reorganization in a multi-branch structure gives rise to tax or other legal claims. Anna Afanasyeva, a lawyer at Beiten Burkhardt, noted that the Federal Tax Service often views conversion into an OJSC as a signal for a large-scale audit, which drags on for at least three months, and did not rule out that violations might be found, in particular "gray" imports of mobile phones.
Euroset was prepared for audits. "If we speak of the entire group, tax audits are conducted almost monthly, so we have adapted to them perfectly," said Eldar Razroev.
Sabina Mukhamedzhanova, an analyst at Bank of Moscow, recalled that reorganization allows creditors to demand early repayment of debt. According to Bank of Moscow estimates, at the end of 2006 the group's debts totaled $620 million and could grow to $700 million in 2008. Analysts considered the scenario in which a significant portion of creditors would demand early repayment unlikely. According to a source familiar with Euroset's plans, the company was negotiating a $100 million loan with one of the banks, secured by Euroset shares.
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