CEDC’s Withdrawal From Nemiroff Sale Process Is A Positive Development

Analysts at JP Morgan maintain their "overweight" rating on Central European Distribution Corp CEDC. CEDC has withdrawn from the Nemiroff sale process. JP Morgan mentions, “We believe that the market will see this as a positive development. It avoids CEDC either further gearing up its balance sheet or issuing new stock at what we see as a depressed share price.” “CEDC expects to receive the proceeds from the disposal of its Polish distribution business in early August. These proceeds will amount to PLN400m ($122m). CEDC had previously said that it hoped to use these proceeds to acquire Nemiroff. It now plans to use them “to maximize return on capital, increase fully diluted earnings per share and/or reduce financial leverage… In our view CEDC’s most attractive opportunity would be to gain full control of Whitehall, thus providing a "cleaner" ownership structure and allowing a reversal of the accounting changes forced under ASC810,” the analysts add. JP Morgan says, “If this is not possible at an acceptable price, we would rather CEDC paid down debt rather than bought back shares. In our view the prospect of multiple-expansion as investors became more relaxed about CEDC’s balance sheet would be more positive for the share price than an earnings-enhancing share buyback (with no multiple-expansion).” More Analyst Ratings here