Boards back $23.9 billion Uralkali Silvinit tie up
The proposal will see Uralkali buy 20% of Silvinit’s ordinary share capital for $894.5 per ordinary Silvinit share, or a total outlay $1.4 billion, and the merger of Uralkali and Silvinit, through the issuance of Uralkali ordinary shares for the remaining ordinary and preferred share capital of Silvinit. This will see Silvinit cease to exist with Silvinit shareholders, other than Uralkali, receive 133.4 Uralkali ordinary shares for each 1 ordinary share in Silvinit and 51.8 Uralkali ordinary shares for each 1 preferred share in Silvinit.
The market capitalisation of the Combined Group, based on the closing prices on 17 December 2010 of the ordinary shares of Uralkali and the ordinary and preferred shares of Silvinit, was $23.9 billion. Uralkali will be the surviving entity following the merger, with its ordinary shares traded on the RTS and MICEX exchanges in Moscow and its global depositary receipts traded on the London Stock Exchange.
“The provided scheme of the deal is a result of work of business consultants and company research and analysis of the following market situation and shareholders readiness. The acquisition plan has to meet the law and regulation requirements and thus should also assume both companies shareholders interests.”
At its 20 December meeting the Uralkali Board of Directors considered the opinion of VTB Capital that the proposal represented a fair outcome for Uralkali and its shareholders. Uralkali CEO, Pavel Grachev, says the move will create a major new potash player on the global market.
“In announcing this transaction today, the Uralkali Board believes that it has taken a critical step towards the creation of a leader in the global potash sector and that the Combined Group will benefit from the opportunities that will arise in this highly dynamic industry. By combining the assets of two leading regional businesses which have a natural strategic fit, the Uralkali Board believes that the long term benefits for shareholders and customers will be considerable and that Uralkali shareholders should vote in favour of the Proposed Combination.”
Silvinit CEO, Vladislav Baumgertner, added that the proposed merger is in the interests of shareholders of both companies.
“The Board of Silvinit recognizes the strong rationale for the merger of these two complementary businesses, and believes that the combined entity, positioned as one of the world’s leading potash companies, will provide a platform for long term growth, which will be beneficial for shareholders, customers, employees and other stakeholders. The Board recommends that Silvinit shareholders vote in favour of the Proposed Merger”.
Finam fertilizer analyst Dmitry Baranov says he expects the merger to be completed during 2Q 2011, adding that pricing is favourable for all shareholders.
“The companies have chosen to optimize and consolidate their assets and powers for better economy. The process of evaluation of the deal and analysis of the market and companies operation have started early in summer. We can expect this deal to have a positive influence on the fertilizers market, albeit the final impact on company share price we will see only when the official acquisition is done, I expect this to come in the middle of 2011.”
Uralkali and Silvinit say a stronger capital structure will enable the merged group to access major global opportunities.
“The move is focused on establishing of the largest potash company worldwide, with leading levels of production and production capacity. This will improve a cost structure that is amongst the lowest in the potash industry. The combined group will expand global sales, with 84% of its combined 1H 2010 sales going to export markets, including such fast developing economies as Brazil, India, China and Southeast Asia. The company will have a cost and capital structure that will enable it to compete vigorously and take advantage of the expected growth in demand from the positive underlying dynamics of the potash market.”