Uralkali sold to group of oligarchs

Dmitry Rybolovlev, the Russian potash tycoon, has sold a controlling stake in his London-traded Uralkali fertiliser company to three other Russian billionaires for an undisclosed amount.

The deal raises fresh questions about corporate governance and transparency in Russian blue chips but could mark a first step in a consolidation of the fertiliser sector.

Uralkali said on Monday that Mr Rybolovlev had disposed of a 53.2 per cent stake, held by his Cyprus-based investment vehicle, Madura, to three other investment vehicles: Kaliha Finance, Aerellia Investments and Becounioco Holdings.

The company - whose export arm accounts for 30 per cent of global potash sales - said these vehicles were beneficially owned by Suleiman Kerimov, the metals tycoon, Alexander Nesis, another metals tycoon, and Filaret Galchev, a cement magnate, respectively.

Mr Kerimov’s company took a 25 per cent stake in Uralkali, it said. Mr Rybolovlev is to retain a 12.4 per cent stake.

While people who said they were familiar with the matter claimed the share transfers valued the company at $10bn - a premium to its current market capitalisation of about $8bn - people close to Mr Kerimov declined to comment on or confirm the sale price.

Depositary receipts in Uralkali traded on the London Stock Exchange closed more than 5 per cent up at $19.93, a five-week high, amid hopes that the sale could lift political risks seen to be surrounding Mr Rybolovlev’s ownership of the company.

Mr Rybolovlev had been singled out in 2008 by Igor Ssechin, the powerful deputy prime minister, over his handling of a mine explosion two years earlier and threatened with billions of dollars in fines. But this threat had seemed to dissipate some months ago – and some investors said their overall reaction to the deal was ultimately muted because of the total lack of transparency.

“The structure of the deal is designed specifically to avoid any disclosure or a buyout of minority investors,” said Steven Dashevsky, a founder of Russian special situations funds, which invests in Russian stocks. “We have a situation where one shareholder … is now being replaced by an odd-looking consortium with questionable corporate governance.”

Not one of the new shareholders has acquired a stake worth more than 30 per cent, leaving them free from requirements to disclose the value of the transaction or to buy out minority shareholders.

“They have taken over a proper public company which holds 10 per cent of the global market for a critical commodity and we don’t know what their strategy is, what their shareholder agreement is, or their specific holdings,” said Mr Dashevsky. “This should be disclosed to all shareholders, but it isn’t going to be.”

Analysts said the deal could be just the first step in a broader transaction that could end in a consolidation of the state’s diverse holdings in Russia’s fragmented fertiliser industry as it attempts to build a national champion.

“This could be just the first step,” said Chris Weafer, at Uralsib Capital investment bank in Moscow. “The state has not yet come up with a clear strategy on how it wants to develop its holdings in the fertiliser sector… It wants to streamline strategic sectors and make them more globally competitive.”

Others have suggested it could be a defensive move by Mr Rybolovlev as he fights divorce proceedings in a Geneva court. Uralkali, however, has said the company is protected from the divorce proceedings.

Another expert suggested the lack of transparency in the deal – and the nondisclosure of the sale price – could leave insiders with room for a great deal of upside should the stakes be sold on later as part of a broader deal.

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