Industry News by Nemesis

Foreign Investors Grab +60% of Shares Available in ALROSA Stock Sale

July 12, 2016

As announced previously, the Russian government has sold a stake in Alrosa, the world’s largest diamond producer, generating $818 million to help close the country's growing budget deficits.

 

"The stock sale in Moscow announced on July 11 is the largest state-asset sale in almost three years and revealed robust interest from foreign investors, who bought more than 60 percent of the offering despite the Western sanctions imposed on Russia for its annexation of Crimea", said Russia's Economy Minister Aleksei Ulyukayev, as reported by Radio Free Europe. Ulyukayev said the demand for shares, primarily from European and Asian investors, was more than twice as high as the 10.9 percent offered and the good showing pushes forward other major asset sales planned from state oil giant Rosneft, shipping company Sovcomflot, and oil producer Bashneft. “We hope that all or part of the companies will be sold by the end of the year in order to finance the deficit of the federal budget,” he said.

 

In the Alrosa sale, the government said it placed a 10.9 percent stake at 65 rubles a share, bringing in 52.2 billion rubles ($818 million) for deficit reduction. That price represented a 3.8 percent discount from the company's July 8 closing price of 67.55 rubles.

 

While the deal was oversubscribed by investors from Europe, Asia, and the Middle East, Ulyukayev attributed a poor showing by American investors to U.S. sanctions on Russia and other unspecified factors. Around 35 percent of demand came from European investors, 35 percent from Russia, 25 percent from the Middle East and Asia, and 5 percent from the United States, said Boris Kvasov, a director at VTB Capital, which co-organized the sale. The Russian Direct Investment Fund, a state investment fund, and co-investors acquired around 50 percent of the placement, a financial source told The Wall Street Journal.

 

Before this week's sale, Alrosa's largest shareholders were the Russian Federation with 44 percent, the Republic of Sakha (Yakutia) with 25 percent, and Yakutian districts with 8 percent. The Russian Federation's share is now down to 33 percent. Around 23 percent of the company's shares were held by third-party investors - an amount that will rise to 34 percent after the sale is closed.

 

Source: The Diamond Loupe

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