Billionaire Usmanov Aims at China After Apple, Facebook Sale

Billionaire Alisher Usmanov sold shares in Apple Inc. and Facebook Inc., focusing on technology investments in China such as Alibaba Group Holding Ltd. and may expand stakes in Russian assets, an executive said.

“Chinese companies account for about 70 percent to 80 percent of the portfolio of our foreign Internet investments,” Ivan Streshinskiy, head of Usmanov’s asset-management company USM Advisors LLC, said in an interview on March 14 in Moscow. Most of the investment is in “Alibaba, and some other companies with great potential,” Streshinskiy said.

Usmanov, 60, built his Metalloinvest Holding Co. iron ore business by acquisitions and is Russia’s richest man, according to the Bloomberg Billionaires Index. He bought a stake of about $100 million in Apple last year and sold it recently this year, according to Streshinskiy. The sale follows a gradual reduction of Usmanov’s stake in Facebook, he said.

“We hope that our investments in China’s Internet companies may show the same and even better returns as we had with the American companies,” Streshinskiy said. China is Russia’s largest trading partner.

Alibaba’s estimated valuation rose to an average of $153 billion last month after the Chinese e-commerce company reported surging sales. The Hangzhou-based company is starting the process for what may be the biggest U.S. initial public offering in two years. Chinese online retailer may start an IPO next quarter and be valued at more than $20 billion, according to co-owner Tencent Holdings Ltd.

Apple Performance

China has refrained from criticizing the Kremlin for plans to annex Ukraine’s Crimea peninsula, abstaining from a United Nations Security Council vote on declaring the region’s referendum illegal. China and Russia have voted together about Syria and Iran, while President Xi Jinping was the most prominent foreign leader to attend the Winter Olympics in Sochi this year, as U.S. and most European Union leaders stayed away.

Apple shares have advanced about 23 percent since March 2013, when Usmanov first said he bought the stake. The Cupertino, California-based company’s stock has declined about 6 percent this year. Facebook initially plunged after its IPO in 2012 and has more than doubled in the last 12 months, taking its market value to about $176 billion.

Alibaba Value

When Usmanov acquired a Facebook stake in 2009, his fund persuaded founder Mark Zuckerberg to sell by giving up its voting rights. Usmanov, with a partner, bought about 10 percent of Facebook when the company was valued at $6 billion to $10 billion and sold some shares in the IPO, which valued the company at $104 billion, the businessman told state television at the time.

Alibaba, which operates online markets for products from Louis Vuitton bags to Boston lobsters, posted its fourth straight quarterly profit in the three months through September, according to a January presentation from Yahoo! Inc., which owns a 24 percent stake. The company, founded by former English teacher Jack Ma, may be worth as much as $200 billion, according to investment bank valuations, which would make it the second-biggest Internet company behind Google Inc.

Russia’s benchmark Micex index has declined about 11 percent since Feb. 17, the day before Ukrainian police fired on protesters in Kiev’s Independence Square, and Russian stocks may drop more following the March 16 referendum in Crimea on joining Russia, Streshinskiy said. If stocks fall further, Usmanov’s company may consider buying more shares of wireless operator OAO MegaFon and Internet company Group Ltd., he said.

Crisis Opportunity

“Mail.Ru and MegaFon revenue is coming from Russia and people won’t stop making calls and using the Internet,” Streshinskiy said. “If the events will further escalate, we will be buying shares. Crisis is always a good opportunity as valuations become cheap.” agreed to buy 12 percent of VKontakte, Russia’s biggest social network, raising its stake to 52 percent, and started to buy back $45 million of its own stock, the company said in statements today.

The operator of games and online networking services jumped 10.5 percent to $36.70 at the close of trading in London, extending yesterday’s 2.3 percent gain and cutting’s decline this year to 18 percent. MegaFon, Russia’s second-biggest wireless operator and controlled by Usmanov, rose 5 percent in London, paring its decline this year to 20 percent.

Crimea, Sanctions

Usmanov’s Metalloinvest, Russia’s largest iron-ore producer, may switch to shipping to China and other markets should Europe apply sanctions on its exports due to the crisis in Ukraine’s Crimea region, Streshinskiy also said.

Russian President Vladimir Putin has backed an accord on annexing the territory, signaling he won’t back down after U.S. and European Union leaders imposed sanctions on Russian officials and threatened further measures.

“We are concerned with the possible sanctions against Russia but don’t see any dramatic repercussions for our business,” Streshinskiy said. “China is unlikely to impose any sanctions. So, we will be trading in rubles, yuan, Hong Kong or Singapore dollars.”

(Updates with closing share prices in 13th paragraph.)
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