Weights in the benchmark BUX index of the Budapest Stock Exchange are slated to change soon as a result of a bid for publicly traded pharmaceutical Egis by key shareholder Servier, with the weight of Egis possibly reduced to half of the current percentage. The changes could benefit the other blue chips traded in Budapest. The exact weights will be determined as a function of Wednesday's closing prices.
As of 31st October, the Budapest Stock Exchange is going to update the percentage of Egis shares in the BUX and BUMIX benchmarks. The steps are taken to adjust the composition of the indices to reflect changes in the ownership structure of Egis as a result of a recent bid by key shareholder Servier for the former's free float.
Egis currently has a free float of 49.09%, which may dramatically decline once the public bid by Servier reaches completion. As a result, the weight of Egis in the BUX and BUMIX indices is likely to be reduced.
As of 31st October, the stock exchange management is reducing the free float to 25% in the index baskets. Should Servier eventually acquire a significantly smaller or larger package compared with the projected amount, further adjustments will follow.
How much will the weight be?
Weighting of the BUX index is based on capitalisation adjusted with the free float. As a result of its free float estimated to halve, Egis may see its weight in the index to roughly half of current 7.1%. This would result in an increased weight for the other blue chips, albeit probably by an insignificant amount.
The move is most likely designed to enable index-linked funds to participate in the recent Servier bid. These can typically deviate by +/-5% from the benchmark weights; leaving the latter unchanged at 7.1% would prevent the funds to offer all of their Egis shares to the buyer.
A snapshot of the Egis story
As reported earlier, Egis shareholders can offer their stock to Servier at a price of HUF 28,000 per share by 5th November, currently this is the most important date investors should be watching.
Portfolio.hu is not expecting institutional investors to launch a joint effort to fight for a higher bid, however the future of a state-owned stake in Egis could result in an unexpected scenario. (It is unknown whether the State Asset Management Agency has offered its stake for sale. State demand a higher sale price might prompt the Servier management to think things through once again.) The baseline scenario is that once the offer is over, Servier could easily end up with a significant controlling interest of 75% or more in Egis.
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