Uralkali and Silvinit clear decks for merger
At Friday’s EGM 90.9% of Silvinit shareholders voted to approve the merger, with a similar meeting of Uralkali shareholders seeing 98.9% of shareholder vote in favour. Uralkali shareholders also approved the acquisition by Uralkali of approximately 20% of Silvinit and financing required.
It is expected that Uralkali will buy 20% of ordinary Silvinit shares for $1.4 billion (at $ 894.5 per share) before the end of February and then attach it to itself through conversion of the shares. Silvinit shareholders will receive 133.4 ordinary shares in Uralkali per ordinary share of the company and 51.8 ordinary shares per preference share. Silvinit shareholders, who reject the proposal must present their shares for buyout by March 22, with the process concluded by April 24, and the merger finalized in May.
Suleiman Kerimov, Head of the Nafta Moscow Company is among combined potash group shareholders, owning 16.1% in the group. Former Uralkali owner, Dmitry Rybolovlev will have a 6.4% stake. The rest of shares will be spread between Filaret Galchev, Alexander Nesis, Anatoly Skurov and Zelimkhan Mutsoev. Akron expects to get 2.5%. After the transaction the shares of the combined company will continue to trade on the RTS and MICEX in Moscow, with GDR’s trading in London.
Uralkali CEO, Pavel Grachev, hailed the approval of the merger plans saying that the combined group will double industry opportunities
“We are pleased that the shareholders of both companies have overwhelmingly recognized the compelling rationale underlying the merger. We are excited about the creation of a leader in the global potash sector and the opportunities that will arise in this highly dynamic industry for the Combined Group.”
Silvinit CEO, Vladislav Baumgertner, was also very positive for the outlook of the merged company.
“The Board of Silvinit is pleased to see that the shareholders of both companies have strongly endorsed the logic of the merger, and the Board, Management and Employees of Silvinit look forward to working together with our colleagues at Uralkali to achieve the strategic ambitions of the Combined Group.”
Silvinit minority shareholder, Akron, tried to prevent the merger through a suite in the Perm regional court, which was rejected on Thursday
Troika Dialog analysts, Mikhail Stiskin, Irina Lapshina, and Zaurbek Zhunisov believe the meetings have proceeded as expected and add that the merged group will be able to capitalize on synergies.
“It seems that 24.5% of minority shareholders supported the transaction, while Acron (6.1%) and another 1.1% were among the dissenters. Overall, the results of the meeting were expected despite the opposition of a number of Silvinit minority shareholders, especially Acron, which failed to attach preliminary measures via court last week before the vote. To recap, Uralkali shareholders who voted against the merger will be able to redeem their shares at around $6.80 apiece, and dissenters among Silvinit shareholders will be able to redeem their stakes at $737 per common and $351 per preferred share, though we do not expect a large number to tender their shares. The merger should bring large synergy effect for both producers, and Uralkali shareholders will especially benefit from the deal thanks to swap ratios, which assume significant price growth potential as former Silvinit assets will be valued as high as Uralkali after consolidation.”
Rye Mann and Gorr analyst, Constantine Yuminov, believes minority shareholders may wait to sell their stake.
“The majority of minority shareholders will wait for the conversion of shares, assuming that market offer is more favorable than the Uralkali bid. But in the future Akron may sell its shares in the combined company concerning that it’s not reasonable anymore.”
Dmitry Baranov from Finam says the deal is favorable and the new union will have greater export opportunities.
“Both companies are export orientated, over 80% of their fertilizers are sold on export, while only 20% are sold on the local market. The domestic market demand is very low and companies easily cover the local market. The new fertilizer giant will have broad opportunities to expand on the foreign market and unite customer base. It will be very positive for consumers with FAS creating special conditions for local consumers. This merge is a step forward concerning foreign investor attraction, maybe after all organizational and legal procedures we will see the Potash union company shares on one of the foreign exchanges.”