The offer of up to 82.44 mln shares by CTC of Ermes shares to FWW shareholders in the ratio of 3 Ermes shares for every 2 FWW is seen as very attractive at the price of 24 cents per share, with Group Chairman Nicos Shacolas pointing out that the “preferential price was fixed many years ago by CTC”.
He added that based on current conditions, the fundamentals of Ermes, its current status as being the leading retailing group on the island and ahead of its significant expansion plans both in Cyprus and Greece, the “Ermes shares should have been offered at least at 30-35c per share.”
Shacolas made the comment when asked by an investor if the Ermes shares, expected to be listed on the CSE in the first half of 2007 in the Main Market, may trade at the same discount compared to book value at which other Group shares, namely CTC and FWW are now trading.
“I find it totally unjustified for either CTC or FWW to trade at such a steep discount and I certainly hope that the same fate will not meet Ermes,” said Shacolas who is counting on the projected price to earnings ratio of 8 times on forecasted 2006 profits to propel the share price higher.
An additional incentive that may help Ermes is the offer to give 1 free warrant for every 5 shares at the exercise price of 40c by April 2011 and plans by the company to follow a steady dividend policy. The Ermes board has decided to pay a 1.6c dividend per share for 2006, which based on the issue price of 24c, gives an attractive dividend yield of 6%.
Shacolas revealed that any Ermes shares not taken up by FWW shareholders to whom the offer is made will be offered to other FWW shareholders, institutional investors and the general public at the same price of 24c but at the discretion of the CTC board.
After the offer is completed, CTC will remain the largest shareholder of Ermes with a 35.9% stake (down from the present 83%), Debenhams Plc UK with a 10% stake, FWW with a 7% stake and 41.1% spread among the public.
Group CEO Georgos Aniliades told the packed investment gathering that Ermes is by far the number one retailing group in Cyprus with a 10% general market share. Ermes is the leading group in terms of clothing, cosmetics and do-it-yourself and is adequately positioned to fight off possible competition from foreign multinationals expanding to Cyprus.
As for the Greece expansion plans, Shacolas revealed that Ermes will expand into Greece together with Debenhams, but overall control will remain in Cypriot hands.
