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. Last Updated: 07/27/2016

Controlling Shares in AvtoVAZ Up for Sale

The government will sell its 50 percent share of Russia's biggest carmaker in December, 27. 5 percent for privatization vouchers and 22. 5 percent in an investment tender, a company official said Tuesday.


AvtoVAZ, producer of the ubiquitous Lada and Zhiguli automobiles, is one of the largest Russian manufacturing firms to hit the auction block. The firm manufactures about 650, 000 cars a year, 40 percent for export, at its factory in the Volga river town of Togliatti.


The sell-off is unusual in that workers do not already own 51 percent of shares, giving outside investors the opportunity to purchase half the company.


Vladimir Chebotaryov, AvtoVAZ deputy property manager, said that both the tender and the auction would be open to foreign bidders, but that foreign investment was not the automaker's primary goal.


"We are particularly interested in having among investors our current suppliers and finance groups, who would be interested in developing our production", he said.


The December voucher auction has been structured to keep an eye on major investors. While bids for under 1, 000 shares will be accepted at local property funds across the country, bidders for over 1, 000 shares will have to register in Togliatti, where the company is based.


Chebotaryov said that the bidding rules were not intended to prevent outsiders from gaining large stakes in the company.


"Private investors do not normally bid for over 1, 000 shares", he said. "This measure is designed to merely monitor big investors".


Workers and management already own 50 percent of the company, which was privatized earlier this year. The workers acquired 25 percent of stock as non-voting shares, 10 percent of shares at a discount and 10 percent of ordinary shares, while management obtained another 5 percent of shares.


AvtoVAZ is no stranger to foreign investment. Chebotaryov said that Banque Nationale de Paris opened a seven-year $150 million credit line to AvtoVAZ for production expansion last week, and German-owned West-deutsche Laodesbank of New York opened a similar $100 million credit line in April.


The All-Russian Auto Alliance, a consortium led by AvtoVAZ, is seeking foreign investment to build a $3 billion plant in Togliatti to make a new generation of Russian small cars. The consortium announced in October that it would open a $1. 5 billion public share issue and promised tax breaks to foreign investors.


AvtoVAZ also has signed two major foreign cooperation deals, one with U. S. auto giant General Motors to provide $700 million worth of anti-pollution devices and another with the Swiss-Swedish engineering firm Asea Brown Boveri to produce fans.


Mikhail Alexandrov, head of investments at the voucher fund Alfa Kapital, said the auction should generate a great deal of interest, but that growing competition from imports could make AvtoVAZ a risky investment.


"It will be difficult for them in the future", he said, adding that his company had not yet decided whether to invest.