| Oleg Deripaska and Roman Abramovich are consolidating their foreign assets The Russian Aluminum company, which consolidated its Russian assets last year, has begun to put its foreign holdings in order. By the end of the year, all of them will be integrated into a single company with Rusal. Thus, the shareholders of Russian Aluminum - Oleg Deripaska and Roman Abramovich - are going to increase the transparency of the holding in order to place its shares on the stock market.
Rusal operates a number of aluminum enterprises located outside of Russia - the Nikolaev Alumina Refinery and Cemtrade (Ukraine, Romania - alumina production), Armenal JV (Armenia, foil production), as well as Compagnia de Bauxite de Kindia (CBK , Guinea, bauxite mining). The latter company was formed on the basis of the state-owned Societe de Bauxite de Kindia, which Rusal received the right to manage for 25 years in April last year. The reserves of the deposits developed by CBK are estimated at 30 million tons of bauxite. Finally, Rusal shareholders own several trading companies, primarily Rual Trade, through which raw materials are supplied to enterprises and primary aluminum is exported from Russia.
Now all these companies are not formally connected with Rusal. Accordingly, for third-party investors, control over them by Russian Aluminum is not obvious. After consolidation is completed, they will be combined with Russian enterprises within one company, the shares of which can be listed on the stock exchange.
The head of the department for PR support of Rusal projects, Alexey Prokhorov, neither confirmed nor denied the company’s plans to consolidate its foreign assets. Meanwhile, the materials contained on the holding’s website state that Russian Aluminum is implementing a program aimed at achieving a high level of openness and transparency. In addition to complete consolidation of assets, it provides for regular publication of financial statements in accordance with US GAAP standards, obtaining a credit rating from international rating agencies, as well as an open dividend policy. Perhaps, at the end of this year, Rusal will place Eurobonds. The final stage of all these actions, according to the company's materials, should be an initial public offering of the holding's shares (IPO, presumably, it will take place in 2004) on the international stock market.
Analysts are positive about Rusal's plans. Vladimir Titkov from Renaissance Capital and Maxim Matveev from Alfa Bank say that the consolidation of assets within the IPO will increase the company's transparency and, accordingly, its capitalization.
True, nothing is known yet about how exactly Messrs. Deripaska and Abramovich will build a scheme for a consolidated company. Deputy General Director of Prospekt Investment Company Eduard Neugebauer believes that they have two options. Firstly, Rusal itself may remain the holding, and all stakes in foreign companies will be transferred to it through its wholly owned subsidiary in one of the European countries. “Many people choose Switzerland for such purposes,” says Mr. Neugebauer. “This is not Cyprus or the BVI (British Virgin Islands - Ed. ), but a serious jurisdiction." Secondly, a foreign company itself could stand at the top of the pyramid, to which blocks of shares in Rusal will be transferred along with its factories, as well as securities of other enterprises and trading companies. “Russian Aluminum itself is unlikely to be able to directly control its foreign assets,” explains Mr. Neugebauer. -- This is too difficult under Russian legislation on currency control. I personally would not want to work as a lawyer in such an organization.”
Both options have their advantages. According to Vladimir Titkov, if a European company is at the top of the holding, then when entering international capital markets it will be easier for it to attract funds due to lower country risk. In addition, in this case, Rusal shareholders will be able to minimize the number of links in the holding chain by transferring all Russian enterprises to a single share. In this scenario, Rusal's production assets around the world will directly belong to a single company. Fortunately, after additional issues were carried out last year at the Krasnoyarsk Aluminum Smelter and the Achinsk Alumina Refinery, the share of Russian Aluminum and structures close to it in all domestic enterprises exceeds 75%.
Maxim Matveev believes that it is wiser to leave Rusal itself as a holding company. “All of its main assets are located in Russia, so it is logical to put a Russian company at the top,” argues Mr. Matveev. “And then draw, if not a direct, but understandable for investors, a line to foreign assets.” Dmitry SIMAKOV |
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