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Saturday, October 22, 2016

New stage of privatization started well for the budget

The tenth part of the shares amazonbasic one of the leading companies in the world ALROSA successfully sold. As stated by the experts of the stock market, Russia’s Finance Minister must be satisfied – the proceeds of privatization should help the budget deficit. This is the first such major deal after a long break, and the government has big plans for the sale of a number of important state-owned companies.

The government approved the privatization of a 10.9% stake (package in 802,781 million shares) of company ALROSA for the price of 65 rubles per one security. The corresponding document was published on the official website of the Cabinet of Ministers on Monday.

“It was the first big deal after a long break and in terms of sanctions. It is a benchmark for future privatization deals”

The budget will receive 52.2 billion rubles from the sale of 10,9% of ALROSA shares, said the head of Rosimuschestvo Dmitry Pristanskov. “And the deal was done with the minimum according to market parameters at a discount”, – he added.

“ALROSA placement happened quickly and successfully. We saw that a quality company can stay successfully at any time”, – said the head of Moscow exchange Alexander Afanasiev, reports TASS.

The deal was last week, today announced the results. On Thursday Sberbank CIB (organizer) has announced the accelerated formation of the book of applications for participation in the sale of 10,9% of ALROSA. On the same day, the order book was fully assembled, that is, the demand of investors willing to buy shares in the company equal to the proposed volume. Friday, 8 July, investor demand exceeded supply.

“The demand is very diversified,” – said the acting head of Sberbank CIB” Igor Bulantsev. “We can’t disclose specific names, but the structure of demand, approximately one third occurred in the Russian participants, one – third of European investors, a little more on the Asian, and about 5% plus or minus for the American investors,” he said, adding that most long term investors.

According to the source “Interfax”, initially among long-term investors who gave prior consent to participate in the SPO of ALROSA, was attended by American Oppenheimer and Lazard included in the capital of the company during the IPO in late 2013. But in the end, Oppenheimer was in the deal entered.

However, the Russian government is not painful and is counting on Americans. “We are attracted to this deal via RDIF serious investors is the middle East funds”, – said the first Deputy Prime Minister Igor Shuvalov. “We understand that the US was not much interest in this deal. We treat this calmly,” he added.

Investors offered for privatized shares of ALROSA, the price from 60 and above, said the head of capital markets Department, global markets Sberbank CIB Anton Malkov.

“We went to the market without price point and offered the investors to determine a comfortable level for them. Was quite a wide variance of who wants what. Someone low, someone high up has begowal (put the purchase requisition). It was different. That was some range, as written in the press (62,5–65 rubles per share), this was not. Application walking in the range of 60 rubles per share and higher than 65 rubles per share. One bid was at a price of 68 rubles. No price point was not. We just wanted to understand where the market is, and then move on,” he said.

Received 52.2 billion rubles necessary to increase the growing budget deficit. The sale of shares in ALROSA important for the market. “It was the first big deal after a long break and in terms of sanctions. It is a benchmark for future privatization deals,” says mark Goikhman from TeleTrade.

Russia’s share in the company reduced to 43.9% to 33%. However, another 25% plus one share owned by Yakutia (Republic of Sakha), which is not going to privatize its stake. Thus, in sum, the state retains control of ALROSA. Another 8% of shares owned by the Yakut uluses (municipalities), their exclusion is impossible in accordance with the laws of the Republic.

We will remind that in the autumn of 2013 passed the company’s IPO on the Moscow stock exchange. Then Russia and Yakutia have sold 7%, another 2% was implemented by the structure itself, the diamond mining company. The shares were placed at 35 rubles, the entire company valued at 258 billion roubles. Now the actual capitalization of ALROSA – more than 500 billion rubles.

In General, experts believe that the transaction was successful. “Placement of ALROSA shares was held quite successfully in the background of the recent turmoil related to the exit of the UK from the European Union and the correction in oil prices. 65 rubles, that such was the offering price close to current quotes. Price at the close of trading on Friday amounted to 67,55 rubles,” – said Vice-President of IFC Financial Center Stanislaw Werner.

Discount the offering price to the market price on the date of announcement of the transaction amounted to about 5%, somewhat less than in previous transactions SPO on the Russian market in 2014-2015″, – analysts of Raiffeisenbank.

“The order book was significantly oversubscribed, meaning demand exceeded supply and was diversified by geography. The amount of shares bought by Russian, Asian and European investors were about the same,” adds Robert Novak from MFX Broker. Total received about 100 applications from various investors from Europe, USA, Asia and Russia.

“For VTB, we thought that a possible deal for 2016. Then consulted and decided that it was not the best time”

Of course, if not sanction, the demand would be several times higher, says Georgy Vashchenko of IR “freedom Finance”. However, in the current environment, the budget will receive from the transaction 52.2 billion rubles – how much is almost expected by the state. The Finance Minister needs to be satisfied, said Werner.

It is important that this transaction creates a Foundation for the successful implementation of further plans for privatization. “This allocation shows that the foreign investors who hesitate to the question of whether to invest in Russian assets that demand for the Russian papers have. And if you do not seize the current favorable opportunity, take advantage of it, says Robert Novak from MFX Broker.

However, in General, the plan of privatization experts consider optimistic. “We believe that the transaction ALROSA was the most simple from the point of view of performance due to the existing listing and the unique investment profile of the company” – analysts of Raiffeisenbank.

After the closing of the transaction Alexei Ulyukayev confirmed the forecast for privatization revenues this year of $ 1 trillion. The Federal budget deficit for this year as time is estimated at 900 billion rubles. The government planned in 2016 to sell packages of Bashneft, Sovcomflot, Rosneft and VTB. Igor Shuvalov announced that the transaction for the privatization of Bashneft and SCF on the way, but to sell the government’s stake in VTB this year, the government refused.

With regard to Bashneft, the Ministry of economic development is working with three applications for participation in the privatization of companies – LUKOIL, “Independent oil companies” (it is led by the former head of Rosneft Eduard khudainatov) and the little-known company “Tatneftegaz”. This Shuvalov does not exclude from the list of potential candidates for the Bashneft company “Rosneft”.

Werner believes that the privatization of ALROSA paved the way for other companies: the next viable candidate Bashneft. However, he does not exclude that other transactions Sovcomflot, VTB and Rosneft may still not take place.

A key challenge, says Werner, is the sale of a 19.75% stake in Rosneft, which the state Treasury may receive at least 700 billion without a premium for control. “For Bashneft today it is possible to gain more than 4.5 billion dollars (290 billion rubles), but perhaps that is not implemented 75, and 50% of the voting shares that will greatly reduce the interest of some candidates, in particular LUKOIL,” says Vashchenko. For a package of Sovcomflot (25%), the state plans to have 25 billion rubles.

The postponement of privatization due to bad market conditions also cannot be ruled out. “Income bracket 1 trillion rubles by the end of the year appears to be still too high. For this you need to sell securities at a maximum score, but skeptical of the market always prefers a discount. In addition, before the end of the year there is not much time, and if the market will go from lots of major proposals, it may reduce stock prices”, – said mark in real.

Now, if the price of oil stabiliziruemost above 50-51 per barrel, inflation will ease to 5-6%, then it is possible to improve the situation on the Russian stock market, especially for oil companies Bashneft and Rosneft.

“The government has the appetite to bail out a minimum of 500 billion rubles, but yet there is a reserve Fund, there is room to maneuver. If the budget deficit will grow, then privatization will have to accelerate. But if the price of oil will rise, it is logical to postpone the sale of major assets until better times,” said Vashchenko.

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