Aeroflot to buy back shares from dissenting shareholders

Aeroflot is to spend 7.04 billion rubles re-acquiring 4.3 per cent of its shares from stockholders who failed to approve the MC-21 leasing project (Irkut)

Russian flag carrier Aeroflot is to buy back shares from those stakeholders who disagreed with the major lease deal of 50 advanced, Russian-made MC-21-300 narrow-body aircraft. An extraordinary meeting of the airline’s board of directors established that the national carrier will take back 47,817,796 shares at a total value of 7.04 billion rubles (US$107 million), Aeroflot reveals in a statement.

Russian legislation allows shareholders to force the company to buy back their stock when they have voted against (or submitted blank votes on) a major transaction, which is then subsequently approved. The fact that such a large number of shares have been tendered for buy back may be explained by opportunistic shareholders taking advantage of selling their stock at higher than market average prices. After Aeroflot announced its decision, the airline’s share price on the Moscow Stock Exchange rose by five per cent, a swing which means it will now have to pay a higher than expected market price. Aeroflot’s registered capital consists of 1.111 billion of ordinary registered shares at a notional value of one ruble. Thus, it will buy back 4.3 per cent of its stock.

The major deal of leasing the 50 MC-21s was put up for vote at the company’s annual meeting and received the approval of 92.22 per cent of stakeholders, with another 0.33 per cent of votes left blank. The new narrow-bodies are scheduled for initial delivery in the first quarter of 2020 stretching through 2026, a timetable in line with the contract the airline signed with Rostec in February 2018. The 12-year lease terms are being financed by Rostec’s subsidiary Avia Capital Services, which is also in the process of delivering Boeing 737-800s to Russia’s largest carrier. The scale of the number of MC-21s in the transaction, including lease payments and maintenance reserves, values the project at some $5.2 billion.