* Management, Gazprombank buy control of VSMPO-Avisma
* Deal valued at $965-$970 mln
* Unwinds 2006 acquisition by state arms-to-metals group
(Adds deal details, financials, analyst)
By Alexei Anishchuk
MOSCOW, Nov 27 State conglomerate Russian
Technologies is selling control in the world's biggest titanium
company through a management buyout, unwinding an acquisition
that fell short of its promise to consolidate the sector.
VSMPO-Avisma, which accounts for around a quarter
of the world's output of the light metal used in aircraft
construction, is being bought out by a joint venture between the
company's management and state-affiliated Gazprombank in a deal
worth up to $970 million.
Russian Technologies head Sergei Chemezov, who like
President Vladimir Putin was a KGB agent in 1980s East Germany,
championed the original acquisition in 2006 but the
arms-to-metals group struggled to repay debts it assumed for the
The venture, Cyprus-based Nordcom, will buy 45.4 percent of
VSMPO-Avisma from Russian Technologies for an estimated
$965-$970 million, VSMPO-Avisma Chief Executive Mikhail Voevodin
told reporters on Tuesday.
"We as shareholders will continue to expand our share of the
global titanium market," Voevodin said, adding that in addition
to the aircraft market VSMPO would develop its product lines for
health, auto making, and oil and gas production.
Including management's existing shares, Nordcom will own 50
percent plus one share in VSMPO-Avisma, while Russian
Technologies will retain a blocking minority stake of 25 percent
plus one share.
The deal was priced at $187 per share, a 16 percent premium
to VSMPO's average share price over the last three months,
lifting the firm's lightly-traded shares as much as 4 percent in
Russian Technologies bought 70.42 percent of VSMPO-Avisma
for $125 per share in 2006, when the company was valued at $1.18
billion, according to the company's data.
"The move is positive for the market's perception of the
company," Boris Krasnojenov, a sector analyst at Renaissance
Capital, said in a note.
"We believe the major shareholders, in their management
role, will be interested in maximising profits, increasing
capitalisation and improving VSMPO-Avisma's transparency, which
could attract (investor) interest."
The deal should close in one to two weeks after approval by
Russian's anti-monopoly office. Financing is being provided by a
group of banks led by state-controlled Sberbank.
The precursor of Russian Technologies, state arms trader
Rosoboronexport, took control of VSMPO-Avisma in 2006 in a deal
that Chemezov said at the time would herald a merger of titanium
assets in Russia, Kazakhstan and Ukraine.
In April this year, Chemezov asked the Russian government
for aid in repaying a $790 million loan from Sberbank and VTB
that funded the original purchase.
"Now the company is financially stable and has secure
orders," Chemezov said in a statement. He added that
VSMPO-Avisma had long-term orders stretching to 2018 from U.S.
plane maker Boeing, one of its major clients.
VSMPO, which also has long-term contracts with Airbus
and other plane makers, plans to increase it titanium
production to 40,000 tonnes per year by 2015 from 27,000 tonnes
Its net income is expected to be 7.1 billion roubles ($228
million) in 2012, the company said. Its debt is seen at $800
Prior to the transaction, Russian Technologies owned 70.42
percent of VSMPO-Avisma, management owned 4.6 percent and the
remaining 24.98 percent was in free float.
Gazprombank, which was founded by Gazprom, is
still 35.5 percent owned by the state gas export monopoly, with
further stakes held by affiliated entities such as its pension
fund. State development bank VEB also owns a 10.2 percent stake.
($1 = 31.0140 Russian roubles)
(Reporting by Alexei Anishchuk; Writing by Douglas Busvine and
Polina Devitt; Editing by Erica Billingham)