Russia's $32 bn state asset sale

Nov 17, 2010 12:00 AM

Russia has approved a plan to sell around 1 tn roubles ($31.92 bn) in state assets including stakes in its two biggest banks and main oil producer, the government said recently.
Here are details of the biggest and most attractive companies. The size of the stake to be sold is in brackets:

VTB (VTBR.MM) (10 %)
Russia will kick off its privatisation plan by selling a 10 % stake in second-biggest bank VTB to U.S. private equity group TPG [TPG.UL] for at least $ 3 bn. Bank of America Merrill Lynch (BAC.N) has been appointed to handle the sale, which should complete some time within a year.
Shares in VTB, currently 85.5 % controlled by the government, have risen more than 50 % to value the company at $35.7 bn. Its investment banking arm VTB Capital dominates the Moscow deal-making scene.

Russia's biggest lender Sberbank has confirmed it will sell 9 % of its shares -- including 3-4 % in a public offer on the stock market -- in a deal that could raise $ 6.4 bn at current prices. The $70 bn company, 60 % owned by Russia's central bank, has around 20,000 branches and holds roughly half of all Russia's personal savings. It managed to avoid making a loss during the financial crisis and is headed by German Gref -- a pioneer of economic reforms under Vladimir Putin's Presidency of 2000-2008.

SOVCOMFLOT (Unlisted, 25 %)
Russia's economic ministry said earlier this month an IPO of a 25 % stake in the state-owned shipping giant will take place next year. Russia's largest shipping group specialises in oil transport and has 144 vessels. Its 2009 net profit nearly halved to $217 mm, while revenue fell 25 % to $ 1.2 bn.

RUSSIAN RAILWAYS (Unlisted, 25 %)
Russia will cede full control of its vast rail network when it sells 25 % of RZhD (Russian Railways). The company, which controls the world famous Trans-Siberian Railway and transports Russia's wealth of natural resources to the rest of the world, needs cash to improve ageing Soviet infrastructure such as tracks and stations. It raised $400 mm via an initial public offering (IPO) of cargo unit TransContainer (TRCNq.L) earlier this month and may have generated as much as $ 4.8 bn by the time the divestment plan is completed. [ID:nLDE6A80K8]

AEROFLOT (AFLT.MM) (minority stake est. 12 %)
Russia's Finance Minister Alexei Kudrin said previous month a minority stake in flagship airline Aeroflot (AFLT.MM) could be sold in 2011. The government owns just over 50 % of the carrier and is expected to retain control at least until 2015, suggesting that an 11.8 % stake owned by the central bank could be up for grabs. Aeroflot remained in the black through the financial crisis, announcing a trebling of net profit to $86 mm in 2009. Its shares are up 43 % in the year to date, valuing the company at $ 2.7 bn.

Russia's largest oil producer Rosneft is 75 % owned by the Russian government but the state could offload a 15 % stake between 2011 and 2013. The company, which supplies about a fifth of Russia's oil, saw third-quarter earnings soar to $ 2.57 bn from $ 1.16 bn the previous year on higher production rates. Company directors have said a stake sale may be difficult without a major reform of Russia's oil taxation system. The company's free float is just 15 %. The rest of the stock is held as treasury shares, which it bought back after raising $10.6 bn in an IPO in 2006. Rosneft shares are down 16 % in the year to date.

FSK (FEES.MM) (c.28 %)
State-controlled Federal Grid Company, or FSK, posted first- half profit up 60 % at 12.6 bn roubles after slumping to an overall loss in 2009. Analysts say it remains vulnerable to ongoing electricity reforms as dictated by the Russian government. FSK, nearly 80 % controlled by the government, also owns part of electricity generator OGK-1 OGK.MM. The shares are up 14 %, valuing the group at about $14.4 bn.

Russia's largest hydroelectric power producer is 60.4 % owned by the government and is also a part-owner of OGK-1. In July it raised 9.2 bn roubles by selling new stock to shareholders to help fund repairs after a dam flood. Its shares are up 37 % , valuing the company at $14.8 bn.

AIZhK (Unlisted, c. 49 %)
The state-owned mortgage agency charged with the development of the home loan market is Russia's equivalent of the Ginnie Mae National Mortgage Association in the US.

ROSSELKHOZBANK (Unlisted, c. 49 %)
The farm industry lender is 1 of the top 5 Russian banks by assets. It has total assets of around 900 bn roubles and received massive government support during the crisis.

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