The Russian government is discussing two options for privatizing ALROSA – one is the sale of small blocks of shares, while the other is selling a large stake to a strategic investor, the Vedomosti Daily says. There is one bidder already - Suleiman Kerimov.
The government intends to privatize the entire state-owned block of shares in ALROSA. The resulting revenue will be reserved for the development of Yakutia, RIA Novosti said yesterday, citing Igor Shuvalov, First Deputy Prime Minister. The forecast privatization plan provides that the State should sell its entire stake in the company by 2016. There are two basic scenarios for ALROSA’s privatization: one is a gradual and partial sale of the state-owned block of shares leaving control in the government’s hands while the other involves the sale of a large parcel of shares to a strategic investor, the government official said. The government is amid an ongoing debate, which of the options to exercise, he said. In the near future, a financial consultant will be hired to analyze the situation. Toward the end of the year it will become clear which of the scenarios will be realized, said a source close to Shuvalov.
Currently, 51% of ALROSA shares is held by the Federal Property Management Agency, 32% belongs to the Ministry for Property Management of the Republic of Sakha (Yakutia), and 8% is owned by Yakutia’s municipalities. Yesterday, the state-owned stake traded on MICEX-RTS was worth RUB 167.5 billion. The company proper is in favor of a gradual sale of shares. In March, the Supervisory Board of ALROSA offered to the company’s shareholders to consider privatization of a 14% stake (7% from the package of the Federal Property Management Agency and 7% from the package of Yakutia) at the end of 2012-2013 and in the future to maintain state-owned controlling interest. Now the company has no analogues in the world - all other public diamond mining companies are much smaller, and the nearest competitor - De Beers – is a private corporation. The gradual sale would give ALROSA a chance to get a fair value: to assess the reaction of investors after the sale of the first part and then optimize the company structure, deciding, in particular, the fate of social facilities belonging to the company in Yakutia and to consider further privatization of the state-owned package, explains the company’s position its representative. However, he is parried by the government official who says that the sale of a large stake in ALROSA to a strategic investor will make the latter able to bring order to the company. The representative of Shuvalov’s office added that the goal of privatization should be to create an economic and financial basis for the development of Yakutia. In any case, the final word rests with the government, ALROSA’s spokesman stressed.
One bidder for the state-owned stake in ALROSA is already there. The company attracts the interest of Suleiman Kerimov, according to the sources close to the businessman and management of ALROSA. Shuvalov did not lend any support to Kerimov regarding the privatization of the state-owned shareholding in ALROSA, the government official underlines. According to him, the idea of Shuvalov is to combine the packages held by the Federal Property Management Agency and Yakutia and sell them at a high price. The representative of Shuvalov’s office would not comment on this. The representative of Nafta Moskva confirmed that Kerimov is interested in the company, but declined to comment on details.
It is hardly worth to sell the whole package – ALROSA shoulders a too high social burden in Yakutia. Therefore, first of all it should be decided what to do with this burden, Sergei Phylchenkov, an analyst at IFC Metropol, says. According to the expert, the gradual sale could bring more money to the State than the one-time sale of the entire government-owned stock.
Life-saver in case of crisis
For investors, a partial privatization of ALROSA could prove a boon, Phylchenkov believes. Because the state as a shareholder can support the company in case of a slump in diamond prices by way of purchasing its goods to the State Depository, Gokhran, as it was in the previous crisis, he added.
ALROSA
Shareholders: the Federal Property Management Agency (51%), Ministry for Property Management of Yakutia (32%), uluses (municipalities) of Yakutia (8%).
Capitalization – RUB 184.1 billion
Revenue (IFRS, 2011) – RUB 137.7 billion
Net income – RUB 26.7 billion
