He increased his stake in Phosagro

The former head of the board of directors of Phosagro, rector of the St. Petersburg Mining University, Vladimir Litvinenko, increased his stake in the company to almost 15%, purchasing about 5% of the shares from the structures of the main owner of Phosagro, Andrei Guryev. For them he had to pay a 20% premium to the market, but Mr. Litvinenko considers this a successful investment, in particular because of “exceeding promises on dividend payments.” But against the backdrop of low prices for fertilizers, Phosagro's dividends for 2013 may fall by 2.4 times - to 4.5 billion rubles.

Photo: Alexander Koryakov, Kommersant / buy photo

Yesterday, the largest producer of phosphate fertilizers, Phosagro, announced that the rector of the St. Petersburg Mining University, Vladimir Litvinenko, increased his stake in the company by purchasing a 4.92% stake. The transaction amount was about $268.8 million, which means a premium of about 20% to the market (yesterday the company's shares cost $35 per share on the Moscow Exchange). The total share of direct ownership of Mr. Litvinenko in the authorized capital of Phosagro increased from 4.81% to 9.73%, and taking into account the fact that another 4.81% of shares belongs to Feivel Limited, of which he is the beneficiary, in total it amounted to about 14.54%.

The shares were sold to Vladimir Litvinenko by Carranita Holdings Limited, whose beneficiaries are Deputy Chairman of the Board of Directors of Phosagro Andrey Guryev Sr. and members of his family. They remained the controlling shareholders of Phosagro, owning in total about 60% of the shares. Free float remained at 20.3% of outstanding common shares. Phosagro General Director Andrey Guryev Jr. noted that the increase in Mr. Litvinenko’s share will not affect the company’s development strategy; the proceeds will be used to finance projects not related to Phosagro.

Vladimir Litvinenko became a shareholder of Phosagro in 2007 after joining the Apatit group, in which he owned a stake following the results of the voucher privatization of the 1990s. In 2010-2011, he headed the board of directors of Phosagro. It was not possible to contact Mr. Litvinenko yesterday; his representatives did not respond to Kommersant’s request. According to his comment in the Phosagro message, he acquired the shares because the company is now significantly undervalued and has significant potential for further growth, and also “exceeds its promises to investors on dividend payments.” Mr. Litvinenko also calls the acquisition of such a block of shares on the stock exchange unrealistic, “since Phosagro shareholders consider the company an extremely successful investment target and are in no hurry to sell its shares.” In addition, buying back part of the free float would reduce the liquidity of the securities. The report notes that borrowed and own funds were used to finance the transaction. A Kommersant source familiar with the situation notes that Mr. Litvinenko paid most of the amount with a loan from a large Russian bank.

Phosagro's dividend policy involves paying 20-40% of net profit according to IFRS. After its IPO in 2011, Phosagro maintained a payout level of 49% of consolidated net profit. Phosagro paid the largest dividends for 2010 and the first quarter of 2011 - almost 30 billion rubles. Then Mr. Litvinenko owned at least 5% of the company, that is, he received at least 1.5 billion rubles. Total dividends for 2012 amounted to 10.42 billion rubles, but due to the collapse of the fertilizer market and falling indicators, Phosagro's dividends for 2013 may be 2.4 times lower. Last week, the board of directors of Phosagro recommended that shareholders approve dividends for 2013 - 4.5 billion rubles.

Sergei Filchenkov from Metropol believes that, given the projected increase in prices for phosphate fertilizers in 2014 and, consequently, the income of producers, the overpayment for increasing the stake in Phosagro is justified. In his opinion, the company is interesting for investors; it may be included in the MSCI index after its rebalancing in May. This will increase the flow of funds from funds for which MSCI is a benchmark.

Olga Mordyushenko

Vladimir Litvinenko is attracted by dividends