| Vladimir Potanin must today determine the fate of the deal with OMZ Today, Interros, which owns about 70% of the shares of Power Machines, must decide whether to continue to merge with OMZ or wait until the authorities approve the sale of Vladimir Potanin’s stake in Power Machines to the German concern Siemens. Interros does not hide the fact that if the authorities approve the deal with Siemens, the shares will be sold to the Germans, and the merger with OMZ will not take place. However, earlier the general director of Power Machines, Evgeny Yakovlev, had already said that both deals should not be allowed to fall through, and if the authorities do not make a decision before the deadline for the exchange of shares with OMZ expires, the merger will continue. Today is the last day when Interros can pay for 37% of the shares of OMZ, for which it submitted an application on June 13 (also, by the way, at the last moment), and 60% of the shares of Power Machines. Let us recall that technically the merger is the takeover of Power Machines by OMZ and then the distribution of shares of the already merged structure by 50% between the owners of both companies.
Yesterday, the FAS confirmed that they would not have time to consider the application of Siemens, which, as is known, on July 6 submitted to the agency a petition to purchase 71% of Power Machines. By law, officials must make a final decision within 50 days from the date the application is submitted. Siemens still refuses to comment. Interros and Power Machines suggest waiting until Tuesday.
Meanwhile, the remaining minority shareholders of Power Machines consider the merger with OMZ unprofitable for themselves. Arguments against the deal in an open letter addressed to Interros CEO Andrei Klishas, Power Machines CEO Evgeniy Yakovlev and Chairman of the Board of Directors of Power Machines Ekaterina Salnikova were outlined by Prosperity Capital Management director Alexander Branis. He represents the interests of minority shareholders who own about 10.1% of Power Machines shares, and was even elected to the company’s board of directors at the annual meeting of shareholders held on June 30. “This is not the only way to communicate with other shareholders,” he told Vremya Novostei yesterday, “we are trying in different ways to prove that the transaction price does not correspond to the quality of OMZ’s assets.”
The letter, in particular, states that a significant part of OMZ’s assets is non-core for Power Machines. “We are being offered to buy assets, two thirds of which are not related to energy or nuclear engineering, producing steel, mining equipment, etc.,” the newspaper’s interlocutor clarified. In addition, the letter indicates, the production of nuclear reactors owned by OMZ carries increased political risks. “This is not a business that can be conducted in market conditions, and it is fraught with the loss of markets,” explains Mr. Branis, recalling how the United States doubted that Iran, where OMZ supplied reactors, would use them for peaceful purposes . He clarifies that according to most financial indicators, a 50/50 merger of companies is not justified. “Risks,” says Mr. Branis, “require a discount.” However, he found it difficult to indicate a fair exchange rate, since he believes that the deal with OMZ will not take place.
Sergei Nikolaev, Deputy General Director of OMZ for Investment Development, considers all of Mr. Branis’s arguments to be unfounded. “The profit of OMZ in 2003, according to IAS standards, amounted to $23 million, and that of Power Machines was only $3 million, net revenue was $546 and $340 million, respectively,” he told Vremya Novostei. “We have already sold most of our non-core assets, only mining equipment remains,” says Mr. Nikolaev. According to him, nuclear engineering accounts for only $120 million in sales, Skoda’s nuclear and steel divisions account for another $100 million each, and Spetsstal accounts for $60 million. And OMZ has no political risks, he believes. more than any other company present in foreign markets. According to Mr. Nikolaev, the minority shareholders of Power Machines are simply afraid that their shares after the merger with OMZ will be halved.
Theoretically, the minority shareholders of Power Machines may prevent the merger from being brought to its logical conclusion. They will not participate in today's issue, since they did not submit applications like Interros. According to Mr. Nikolaev, for a merger it is important that the exchange is carried out by the shareholder who has a controlling stake. “I think that Interros will still pay for its securities,” he says, “and the rest can be exchanged through an additional issue of shares of the already merged company or through treasury shares.” If Interros does not buy OMZ shares today, Mr. Nikolaev did not rule out the possibility of a new issue. However, so far the minority shareholders, according to Mr. Branis, do not intend to exchange or sell shares.
“Of course, like any investor, we do not exclude this if the price is attractive,” he clarifies. “In the meantime,” he told Vremya Novostei, “we are trying to convince the shareholders of Power Machines not to merge with OMZ, regardless of whether negotiations with Siemens are successful or not, which require much more time.” OMZ, however, does not rule out selling part of the Siemens shares if the merger continues. And Mr. Branis doubts that the state will allow this. It was not possible to find out yesterday how the management of Interros and Power Machines reacted to Mr. Branis’s arguments.
Observers find it difficult to place bets. Some cite the fact that the authorities allegedly do not approve of the deal with the Germans. However, “it is more profitable for the state for Siemens to buy Power Machines,” believes Sergei Suverov, an expert at Zenit Bank. In his opinion, the authorities should be interested in updating the equipment of Power Machines, which were designed back in the 70s, and re-equipping Russian power plants. And also in replacing gas turbines (Siemens produces them, but Power Machines does not) with more modern ones that consume less gas. This will free up additional volumes for export. Also, Power Machines, using the Siemens marketing network, will significantly expand export markets and increase sales and, accordingly, taxes to the budget. Yana VIKTOROVA |
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