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ALROSA Outlines Govt. Privatization Requirements

Mar 19, 2012 8:04 AM   By Avi Krawitz
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RAPAPORT... ALROSA’s supervisory board outlined its requirements for the privatization of state-owned shares in the company stressing that government will retain control of the Russian diamond mining company’s activities.

The board stated that the Russian Federation and the Republic of Yakutia should each retain a stake of 25 percent plus one share in ALROSA. The Russian Federation currently holds 50.9 percent and the Yakutia Regional councils hold 40 percent, while the remaining 9 percent have been free-floated on the Russian Trading System (RTS) exchange.

In February, Alexei Uvarov, the  head of the Russian Ministry for Economic Development’s property relations department said that ALROSA was excluded the government’s list of strategic companies indicating that a privatization of the state’s shares was pending as a precursor for an initial public offering (IPO). Uvarov added that the government planned to sell 7 percent of the federal government’s stake and 7 percent of the Yakut government’s holding.

At last week’s meeting, the board approved these guidelines as key parameters for privatization and added that the possible terms of sale of these shares would be subject to relevance and readiness of ALROSA’s financial statements for the first half of 2012 or for the full year.

The board stressed that the full withdrawal of the Russian Federation from ALROSA’s authorized capital would result in the company needing to redeem the $1 billion, 10-year Eurobonds, which were placed in 2010, from their holders. ''[This] will deteriorate ALROSA’s macroeconomic indicators, including the progress rate and completeness of the investment program,'' the board explained. 

Analysts at Metropol Investment Financial Company noted that recent developments at ALROSA, including government plans to privatize its shares, indicate that an IPO is still in the works. ''In our view, the news signals long-awaited progress in the government’s privatization plan and toward a future IPO, while ALROSA’s management recently confirmed that at present it is proceeding with internal pre-IPO preparations as planned,'' Metropol stated.

Tags: Alrosa, Avi Krawitz, diamonds, Rapaport
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