September 19, 2018 / 9:07 AM / 3 months ago

UPDATE 1-Switzerland's Sulzer turns profit on shares bought from sanctions-hit Russian investor

(Adds CEO comments, market reaction)

By Michael Shields

ZURICH, Sept 19 (Reuters) - Swiss pump maker Sulzer has sold at a profit shares it bought from Russian oligarch Viktor Vekselberg in April in a move designed to reduce his stake below 50 percent and escape U.S. sanctions.

Sulzer’s chief executive also gave an upbeat assessment of the company’s performance, saying it had emerged unscathed from the U.S. sanctions and a global trade war.

Sulzer was caught in the crossfire when Vekselberg, who at the time had a 63 percent stake, and other oligarchs close to Russian President Vladimir Putin were hit by U.S. sanctions as punishment for alleged Russian meddling in the 2016 U.S. election and other “malign activity”.

It has now placed via an accelerated book build all 5 million treasury shares it had bought for 546 million Swiss francs ($566 million), increasing its free float to 51 percent, it said on Wednesday.

“The placement price of 112 Swiss francs per share, considering the purchase price of the shares of 109.13 francs per share in April 2018, results in a capital gain of around 15 million francs which increases Sulzer’s equity,” it added.

Its shares fell 5.1 percent to 115.50 francs by 0900 GMT.

Chief Executive Greg Poux-Guillaume told Reuters two-thirds of the placement went to “long” investors and wealth managers.

“We favoured people that were intending to hold the shares,” he added, noting no Russians were among the buyers.

Sulzer’s U.S. bank accounts were briefly frozen for certain transactions after Washington imposed sanctions on Vekselberg and 23 other Russians in April.

The U.S. Office of Foreign Assets Control, which oversees and enforces sanctions, had given Sulzer until Oct. 9 to transfer proceeds from the April purchase to an escrow account for Vekselberg’s Renova holding company, which is barred for now from receiving the money.

“We got to the point where we thought the markets were stable, that the timing was right. We could have waited until after Oct. 9 to place the shares but then we would have had to stretch our balance sheet to pay the proceeds,” Poux-Guillaume said.

He said Sulzer’s third-quarter results, scheduled for release on Oct. 25, “should contribute to maintaining that positive sentiment on Sulzer and how the company is performing. I’d say so far, so good. We haven’t seen an interruption of our commercial momentum.”

“The trade war that’s currently raging is forcing us to juggle a bit on where we supply and where we deliver. But we have a global business with factories everywhere. We can adapt,” Poux-Guillaume added in a telephone interview.

Renova now has a 48 percent stake in Sulzer and that is likely to stay for some time given sanctions, Poux-Guillaume said.

“They can’t go up. The only way they can go is down through dilution or if they are ever able to sell down the road, but that’s not the case currently,” he said. ($1 = 0.9643 Swiss francs) (Reporting by Michael Shields; editing by Brenna Hughes Neghaiwi and Adrian Croft)

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