Russian newspaper Vedomosti reported that Nafta Moskva, controlled by Suleiman Kerimov, is close to the acquisition of a controlling interest in Belaruskali from the Belarusian government for $15 billion.
Belaruskali is the fourth-largest potash producer globally. Last year, Suleiman Kerimov and partners bought a controlling interest in Uralkali, which is in the process of a merger with Silvinit. Uralkali and Belaruskali have been partners in potash exports through Belarusian Potash Company (BPC).
Silvinit has officially announced changes in its shareholders lineup that own at least 5% of its common stock. According to the report, Forman Commercial Ltd has acquired 24% of common shares in the company and Fenguard Ltd has taken 23% of the stock.
Earlier, on August 16, Silvinit likewise reported changes in its shareholder structure. According to that report, the share of Forman Commercial Ltd was the same 24%, while the stake of Fenguard Ltd was lower, comprising 20% of common shares.
The recent change in Silvinit’s shareholder structure and the appointment of Uralkali’s ex-CEO to head it could be seen as a step towards a potential merger of Uralkali (LSE:URKA) and Silvinit (RTS:SILV) , reports Uralsib's Anna Kupriyanova. Consolidation would see the emergence of the world’s second-largest potash producer and the largest potash exporter (under Belarussian Potash Company). Moreover, strengthened negotiation power for export pricing coupled with greater synergies and the potential for cost improvements (primarily on Silvinit’s side) would have a positive impact on the financials and valuation of the consolidated entity relative to the sum- of-its-parts. Uralsib estimate the market capitalization of the consolidated entity would be 15% higher, if Silvinit’s discount to Uralkali is disregarded; and at least 21% higher, if export prices and cost improvement potential for Silvinit are considered.
The better liquidity of Uralkali shares make it a less risky and preferable entry into a potential consolidated entity for a wider range of investors. Moreover, the attractiveness of Uralkali stock has been enhanced with the recent elimination of penalties associated with the mine-flooding incident back in 2006. At the same time, Silvinit’s 25% discount to Uralkali on a 2010E EV/EBITDA suggests a potentially higher return on Silvinit, as the valuation gap between the two shall narrow. The latter, however, largely depends on conversion terms and the mechanism for consolidation, which remains uncertain as of yet, and may favor one asset over another. Silvinit also hold risks, associated with its potential conversion for consolidation (if at all), although the final benefits for minorities may compensate for the issue of timing.
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