KamAZ May Follow AvtoVAZ's Path

KamazA KamAZ truck in the 2005 Barcelona to Dakar rally. A European firm is tipped to buy one-quarter of the company.
SINGAPORE -- KamAZ, the country's largest truck maker, may sell one-quarter of its shares for $1.25 billion this year to a strategic investor from the European auto sector, sources familiar with KamAZ's plans said Tuesday.

Just a few weeks ago, France's Renault bought one-quarter of Russia's largest carmaker, AvtoVAZ, as global carmakers scramble for a share of a Russian market set to become Europe's biggest in a few years.

Sources familiar with KamAZ's plans said Germany's MAN, Sweden's Scania and Volvo and Italian firm Iveco were among potential investors in the firm.

But they said KamAZ was also considering a secondary share offering or a merger with Belarussian truck maker MAZ, which would significantly change the strategic stake sale plan.

"Most likely, the deal will be planned in two stages: a sale to a strategic investor to raise the valuation, and then a share issue," one source said on the sidelines of a Russian economic forum in Singapore organized by Troika Dialog.

The source told reporters that, if the sale takes place, KamAZ would be valued at 10 times its earnings before interest, taxes, depreciation and amortization, or $5 billion.

The plan for KamAZ would mirror developments at AvtoVAZ, which was first consolidated by state firm Rosoboronexport with the help of Troika Dialog.

In February, the duo sold 25 percent of AvtoVAZ to Renault for more than $1 billion. They plan to float around 25 percent of its stock with the aim of keeping more than 25 percent in state hands.

Unlike AvtoVAZ, KamAZ is controlled by its management, which has built up a stake of over 50 percent, also with the help of Troika Dialog. The government owns around 30 percent and has said it may sell its stake via a London placement.

Both AvtoVAZ and KamAZ are big Soviet-era manufacturers located in the neighboring Volga regions of Tatarstan and Samara.

Foreign carmakers started actively investing in Russia a few years ago, when the country scrapped import duties on car parts. Over a dozen global players have opened or plan to open assembly plants in the near future.

The tax grace period has expired, but as Russian demand for cars is showing no signs of cooling down, global players are looking for new cooperation deals and partnerships.

Foreign car sales in Russia have seen double-digit percentage growth in recent years as incomes have risen fast along with economic growth, while high inflation has discouraged saving and supported booming consumption.

A second source familiar with KamAZ's plans also said the firm would borrow $200 million via a syndicated loan in the second quarter. The loan would fund the company's investment program and refinance existing debt.

The three-year loan would have a margin of 275 basis points over the London interbank offered rate and was being arranged by Citigroup, the source said.

KamAZ is traded on the MICEX and RTS exchanges but has no foreign listing. It produces nearly three quarters of Russia's dump trucks and about half of the country's other large cargo vehicles.

The second source said the company, which exported every fourth truck it produced last year, was also interested in buying an assembly plant in India.