Uralkali’s $1.32 Billion Buyback Plan Draws Delisting Closer

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Uralkali PJSC’s board voted to buy back as much as $1.32 billion of its own shares, bringing the world’s largest potash producer closer to delisting in London and Moscow.

The company offered to buy as much as 14 percent of its shares at $3.20 each or $16 a global depositary receipt, a memorandum published Tuesday showed. The Russian miner may delist in London and Moscow if its free float, or level of publicly available shares, shrinks beyond a certain point, it said.

Uralkali bought 11.56 percent of its stock in April and May for about $1 billion, almost doubling the shares held in treasury and cutting its free float to 23.35 percent.

The new buyback through unit Enterpro Services Ltd. on similar terms expires at 12 p.m. in Luxembourg on Sept. 25, according to the memorandum. Stakes smaller than 100 shares or 20 GDRs will be bought back in full without so-called proration. A completion announcement is expected Oct. 16.

If the buyback cuts Uralkali’s free float on the Moscow exchange to less than 10 percent, the bourse may exclude the company’s shares from its Level 1 quotation list, hurting the price and liquidity, the potash producer said. That may lead Uralkali to seek a delisting, according to the memorandum.

Buyback Premium

A smaller GDR free float may make it “impracticable” to maintain a listing on the LSE, Uralkali said. While the board decided that keeping GDRs traded in London isn’t a “strategic priority,” it plans to keep the Moscow listing, Paul Ostling, an independent director, said on a conference call.

Uralkali may also drop the Moscow listing to go private, Konstantin Yuminov, a Raiffeisenbank analyst, said by phone.

Uralchem JSC, controlling about 20 percent of Uralkali, may seek to take the potash producer private and merge with the company, Vedomosti newspaper reported in June.

Uralkali encouraged minority shareholders to tender stock, saying in the memorandum that “recent press speculation has suggested” that a major owner may seek to take the company private. That wouldn’t benefit smaller shareholders as it “typically does not involve a premium,” it said.

The buyback offer is at a premium of about 9.6 percent to Monday’s closing price in London, according to data compiled by Bloomberg.

The GDRs rose 2.1 percent to $14.90 by the close in London and the shares fell 0.1 percent to 203.30 rubles in Moscow.

New Buyback

If the new buyback is exercised in full, Uralkali will acquire about 60 percent of its free float, said Kirill Chuyko, an analyst at BCS Financial Group in Moscow. That means it may need another $800 million to become fully private, he said.

Uralkali won’t need to make a mandatory offer to minority shareholders after the buyback as the levels of treasury stock won’t breach a 30 percent limit, Chief Financial Officer Anton Vishanenko said on the call. The company plans to use some of its current treasury stock in a so-called repo deal either with Sberbank or VTB to partly fund the buyback program, he said.

The press representatives of Uralchem and Onexim Group, both holding about a fifth of Uralkali, declined to comment.