Russia Starts Alrosa Share Sale to Narrow Hole in Budget

  • Russia to decide on sale Friday after assessing price demands
  • Government is offering 10.9% of Alrosa on Moscow Exchange

Russia began selling shares in Alrosa PJSC, the world’s largest diamond miner, as President Vladimir Putin tries to lure foreign investors to the troubled Russian economy.

The government made a formal offer on selling 10.9 percent of Alrosa, Economy Minister Alexei Ulyukayev said Wednesday. Accelerated book building is starting immediately, Alrosa said in a regulatory filing.

The state will decide on the deal on Friday after the organizers, state banks Sberbank CIB and VTB Capital, gather information on investors’ price demands, a person with knowledge of the matter said, asking not to be identified as details aren’t public yet.

Russia is looking for cash to help fill a hole in its budget after oil prices collapsed, cutting state revenue. Alrosa, with a market value of almost $8 billion, is one of the biggest state assets that Putin has approved for sale as the government faces its widest deficit since 2010, in the aftermath of the global financial crisis .

Russia won’t use proceeds from the sale on anything that is sanctioned by U.S., the European Union or Switzerland, Alrosa said.

Neither Ulyukayev nor Alrosa gave a price range for the offering. Government officials were seeking to sell the Alrosa stake at 71 rubles ($1.10) a share, Kommersant reported on Monday, citing unidentified people. That would be a 3.3 percent premium to the closing price in Moscow Wednesday, after the stock fell 1.3 percent to 68.71 rubles.

Alrosa’s share price has advanced almost 25 percent this year amid a recovery in the diamond market. The gem miner reported record profit of 49.2 billion rubles in the first quarter and promised to pay out half its net income in dividends for 2015, more than the 35 percent required by company policy.

Alrosa’s management and Sberbank CIB had been meeting with investors in Asia, the U.S. and Europe starting from May. The company’s 2013 initial public offering raised $1.3 billion and attracted buyers including the U.S.-based Oppenheimer Funds Inc. and Lazard Ltd.’s asset-management unit. Both expressed interest in the new share sale, Interfax reported July 1.

The Russian state, regional governments and the miner itself sold a combined 16 percent stake in an initial public offering in 2013. The federal government controls 44 percent of Alrosa, before the sale.

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