Billionaire Mikhail Prokhorov’s Onexim Group agreed to buy Suleiman Kerimov’s stake in OAO Uralkali, bolstering prospects that a standoff over a global marketing venture for key crop nutrient potash will be resolved.
The parties expect the purchase of the 21.75 percent stake to close shortly, Moscow-based Onexim said in a statement today. The terms are confidential, it said. The stake was valued at $3.5 billion at share prices for the world’s largest potash producer before the announcement.
The sale may defuse a dispute between Russia and Belarus sparked by Uralkali’s July withdrawal from a partnership that marketed 40 percent of global potash exports. The falling-out and Uralkali’s plan to boost production roiled the $20 billion market for the soil nutrient. Belarus has called for a change in the company’s ownership before a reconciliation is possible.
“The news is good for Uralkali and its investors, as Onexim will safeguard Uralkali’s corporate governance remaining at the highest level, which couldn’t be the case if there was be another, less transparent winner,” Konstantin Yuminov, an analyst at ZAO Raiffeisenbank in Moscow, said by phone today.
Prokhorov, 48, a co-owner of the Brooklyn Nets basketball team, may be joined in an acquisition of the combined 33 percent stake held by Kerimov and his business partners by Belarusian-born billionaire Dmitry Mazepin, three people with knowledge of the plans said today. Kerimov, 47, was seeking a price based on a market value of more than $20 billion for the whole company, people said in September.
“The purchase of the stake in Uralkali is a long-term investment in a company that is unique,” Onexim Chief Executive Officer Dmitry Razumov said in the statement. “We are certain that the potash industry has strong fundamentals.”
Kerimov and billionaire partners Filaret Galchev and Anatoly Skurov began receiving offers from potential buyers after Belarus arrested Uralkali CEO Vladislav Baumgertner in Minsk on Aug. 26. That was a month after the Russian company abandoned its trading venture with Belarus. The CEO was moved from Minsk’s KGB prison to a rented apartment on Sept. 26 amid reports Kerimov was in talks to sell his stake. His arrest was extended by a further two months on Oct. 28.
Uralkali gained 2.3 percent to 179.2 rubles by the close in Moscow trading. Its depository receipts declined 3 percent to $26.91 in London. The yield on Uralkali’s eurobond due in 2018 declined 20 basis points, the most since Sept. 19 on a closing basis, to 4.89 percent.
North American potash producers were little changed. Potash Corp. of Saskatchewan Inc., the region’s largest supplier, rose 1 percent to $32.71 at 11:38 a.m. in New York while Calgary-based Agrium Inc. (AGU) was up 0.1 percent and Plymouth, Minnesota-based Mosaic. Co. was 0.2 percent lower.
“It’s neutral for the potash market, as even if Onexim restores the partnership with Belarus, it won’t help a recovery in potash prices, which started to collapse at the start of the year,” Raiffeisenbank’s Yuminov said.
Skurov didn’t answer phone calls, nor did Galchev’s press secretary. Uralchem spokesman Alan Basiev declined to comment.
“Over the time of our investment in Uralkali, we have achieved the strategic goal of putting together Russia’s two largest potash producers, which led to the creation of the global leader in the potash industry,” Pavel Grachev, chairman of Kerimov’s Nafta Moskva holding company, said in the statement. “We are now moving towards different goals and challenges. And we are positive that with the arrival of the new investor, Uralkali will enjoy new opportunities for its continued strategic development.”
Prokhorov, 48, holds 17 percent of United Co. Rusal, the world’s largest aluminum producer, and controls Moscow-based Renaissance Credit and Renaissance Capital banks. Onexim considered an acquisition of Uralkali in 2010, stepping back to allow the purchase by Kerimov, who was Prokhorov’s partner in Polyus Gold at the time. Uralkali merged with Russian rival OAO Silvinit in 2011, to form the largest supplier of the crop nutrient.
Mazepin, 45, was born in Minsk and is the main owner of Uralchem, a phosphate and nitrogen fertilizer producer. His company has four production facilities, including one in Uralkali’s base of Berezniki, in Russia’s Perm region. Uralchem’s consolidated first-half revenue was $1.29 billion.
The new owners will have a 38 percent stake in Uralkali once the company fulfills a plan to cancel about 12.4 percent of its stock held as treasury. They may use loans from OAO VTB Bank and OAO Sberbank to fund the purchase, Vedomosti said today, citing people it didn’t identify.
A decline in potash prices threatens President Aleksandr Lukashenko, who has ruled Belarus since 1994, with a drop in foreign currency needed to meet imports and international debt obligations. A final payment from a Russian-led $3 billion bailout loan is planned for this year. The cash is tied to policy measures, including some state asset sales that haven’t been carried out. Lukashenko called last month for ownership changes in Uralkali as a precondition to starting talks about reviving the trading venture.
Other potential bidders for the Kerimov stake included Vladimir Kogan, a billionaire ally of Russia’s President Vladimir Putin; OAO Russneft owner Mikhail Gutseriev and billionaire Vladimir Evtushenkov; and property investor Alexey Khotin, people said last month.
Prokhorov made his fortune by investing mostly in the commodities industry, together with billionaire Vladimir Potanin. The two jointly controlled OAO GMK Norilsk Nickel (GMKN) until 2008 when Prokhorov swapped his stake into Rusal shares. Prokhorov, whose fortune is estimated at $13.2 billion by the Bloomberg Billionaires Index, this year sold a stake of about 40 percent in Polyus Gold International Ltd. (PGIL) to partners of Kerimov for $3.62 billion.
Prokhorov entered politics in 2011, first heading the pro-business Right Cause party, and then running independently for president in March 2012 against Putin. He lost, gaining 7.98 percent of the votes.
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