French subtext

The sale of control over Rosbank to Societe Generale could provoke another scandal between Prokhorov and Potanin

The French banking group Societe Generale will finally gain control of Rosbank . The foreign shareholder exercised its option to buy out 30% plus two shares of Rosbank for $1.7 billion. This is stated in the official statement of SG, published yesterday. By mid-February next year, SG, which currently owns 20% minus one share of Rosbank, will receive a controlling stake in one of the largest Russian banks. This deal will become another reason for the confrontation between Vladimir Potanin and Mikhail Prokhorov, who share a joint business (including Rosbank): money from the sale will go to the KM Invest company, which belongs to entrepreneurs on a parity basis and which owns shares of Rosbank (about 70%). Moreover, if, based on the results of the ongoing audit, KM Invest is found to have debts, then, as a source familiar with the situation suggests, the proceeds from the sale of the bank’s shares may partially be used to pay them off.

The French group received the opportunity to buy shares of Rosbank last fall, after agreeing with the KM Invest fund. The option offer was valid until December 31, 2008. The fact that Societe Generale could implement it ahead of schedule became clear this summer, when the French turned to Russian regulatory authorities for permission to purchase Rosbank shares. In July, the FAS gave a positive answer, and in October, the Bank of Russia. At the same time, it became known that the conditions for purchasing a stake in Rosbank had not changed since last fall. Thus, the total value of Rosbank's controlling stake was $2.3 billion for Societe Generale.

When the French group begins to control Rosbank, it will be obliged to offer an offer to its minority shareholders, following the completion of which at the end of the first half of 2008, SG expects to increase its stake in the bank to 57.8% of shares. The group plans to spend $2.775 billion for these purposes, which corresponds to a P/BV (capitalization to equity ratio) of 3 as of the end of June 2007. As stated in the SG report, the French group intends to continue cooperation with Interros, which manages the KM Invest package.

How can those in a state of “divorce”? Potanin and Prokhorov will share the money received for Rosbank, it is not reported. A Vremya Novostei source familiar with the situation draws attention to the coincidence in time of two facts - SG’s announcement of the exercise of the option and the decision of the board of directors of KM Invest to borrow $800 million from its subsidiaries, which Mr. n Prokhorov, but could not block these decisions. The source does not rule out that the audit of KM Invest may reveal this debt of the group and use part of the funds received from SG to pay it off.

Since Messrs. Potanin and Prokhorov cannot divide the assets, the source says, it is obvious that SG will pay in money and not in its own shares (this scenario was not ruled out last year).

By the way, today businessmen will have to decide the fate of the blocking stake in Norilsk Nickel, owned by Mikhail Prokhorov’s Onexim group. If by the end of the day Mr. Potanin does not accept the offer of his former partner, the package will go to RUSAL. Vremya Novostei sources familiar with the situation claim that Mr. Potanin’s representatives will announce their reluctance to buy this stake for $15.7 billion, because, according to unofficial information, it is being offered to RUSAL for $12.7 billion.

Ivan GORDEEV