Translated material
Four year deal
Vladimir Potanin completed the sale of Power Machines
Interros finally managed to sell all of its shares in Power Machines. Since 2003, the company has been trying to exit the power engineering project as a non-core business, but it was unable to sell almost 74% of the shares as a single package. As a result, the package was divided into three parts. The first was bought by RAO UES of Russia , the second by the German concern Siemens , and the third was acquired yesterday by the structures of Severstal head Alexei Mordashov. Taking into account the existing shares, all parties became blocking shareholders of Power Machines. “Basic Element,” which for the second time laid claim to the power engineering company, again had no place in the transactions . However, Mr. Deripaska's company may try to buy a stake in RAO, which will be sold next spring.Despite the fact that the sale dragged on for several years, Interros is satisfied with the arrival of Russian and foreign investors in the capital of Power Machines.
Interros has completed a transaction to sell its stake (about 30%) in Power Machines to Highstat Limited, a company controlled by the structures of Alexey Mordashov, Interros said in a press release. -- The price of the package is based on the current stock exchange quotes of Power Machines shares. According to sources familiar with the situation, the transaction amount was $470 million. Mr. Mordashov said yesterday that the deal is his private investment: “I believe in Power Machines and am ready to invest intellectual and financial resources in their development.”
A stake of more than 22% of Power Machines was sold to RAO in December 2005 for $103 million, and Siemens bought 20.6% in January 2006 for $93 million. Thus, Interros received $666 million for its share dollars, while the capitalization of Power Machines has increased by more than one and a half times since the start of the sale of the company to strategic investors.
Vladimir Potanin decided to sell a 74% stake in Power Machines almost immediately after the company was formed from separate production facilities. The first potential buyer was the United Metallurgical Plants, which then belonged to Kakha Bendukidze. It was assumed that OMZ, having absorbed Power Machines, would distribute its shares equally between the structures of Mr. Bendukidze and Interros. Subsequently, it was not excluded that Mr. Potanin’s company would sell its share to Siemens, because it would be worth more than 74% of the shares of Power Machines alone (since OMZ had already been listed on the London Stock Exchange, and the united company could quickly increase its capitalization). However, the deal fell through. At a meeting between Vladimir Putin and the then German Chancellor Gerhard Schröder with the business circles of the two countries in June 2004, Siemens informed state leaders about plans to acquire all shares of the Russian company from Interros and that it had submitted a corresponding application to the antimonopoly service. Participants in that meeting said that everyone took the proposal of the German concern quite seriously, since the industry needed foreign investors and modern technologies. Siemens, of course, did not want to buy half of OMZ. After this meeting, Interros was ready to sell Power Machines to the Germans.
However, it unexpectedly turned out that Siemens is not the only contender for Power Machines; Basic Element expressed interest in purchasing the power engineering company. In addition, it turned out that Power Machines, in addition to turbines for power plants, produces products for the country’s defense complex, that is, it is impossible to give control to foreigners in such a company. As a result, the government of Mikhail Fradkov, represented by the FAS, refused to purchase the German concern, but Basic Element, on the contrary, allowed the deal.
However, the head of RAO Anatoly Chubais opposed this turn of events. After all, it turned out that the entire Russian electric power industry, which as a result of the reform will develop at a rapid pace due to the influx of large-scale investments, will be dependent on his ideological opponent - Oleg Deripaska (according to Mr. Chubais’ plan, in the next five years “Power Machines” should increase sales from 680 million to 1.5 billion dollars per year). And as a result, Interros announced that it had revised its exit strategy from Power Machines: it announced its intention to retain a blocking stake in the company, involve the state and a foreign strategic investor in management, and exit the project when capitalization reaches 1.5- -2 billion dollars. At that time it amounted to just over 400 million. RAO UES became the representative of the state, and Siemens became the foreign investor. At the same time, RAO received shares owned by Interros for management. Now, when the capitalization of Silmashin has reached the declared level, Mr. Potanin’s company has withdrawn from the shareholders of the power engineering enterprise.
But the changes in the ownership structure of Power Machines do not end there. Siemens did not give up trying to increase its share and even wanted to take advantage of the pre-emptive right to purchase the Interros stake, however, after the FAS refused to authorize such a transaction, it changed its mind. Now he has a chance to try to increase his stake in the spring - when RAO, preparing for reorganization, will sell a blocking stake (at a price of no less than $460 million). However, it is obvious that both Mr. Mordashov and Mr. Deripaska will also lay claim to this package: it will allow the first (like Siemens) to gain control over the Russian power engineering industry, and the second will not give control over the industry to a competitor or whoever no matter what.
In the meantime, according to Vremya Novostei, RAO has lost control over the management of shares sold by Interros to Mr. Mordashov, and therefore reshuffles in the governing bodies of Power Machines cannot be ruled out (as is known, the company is headed by RAO Technical Director Boris Vainzikher) . However, those around Mr. Mordashov prefer not to comment on this topic, pointing out that no hasty decisions will be made.