Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Uralmash Offering Has Target of $45M

Russia's largest machine-building plant, Uralmash, intends to raise up to $45 million in June when it reaches out to international markets with a private placement for 26.87 percent of its shares, the company's director said Tuesday.


Uralmash chairman Kakha Bendukidze told a press conference that the private placement would follow the current restructuring of the company's stock.


This plan transfers Uralmash stock to Uralmash Zavody, or UMZ, a holding company created in late 1996 by Uralmash management to allow greater control of both that company and a smaller firm, Zavod Svarnykh Mashinostroitelnykh Konstruktsii (ZSMK), which was spun off from Uralmash during privatization.


Currently, UMZ holds 42 percent of Uralmash and 30 percent of ZSMK. But management has now received permission from the government to transfer 100 percent of its shares in Uralmash and 75 percent of its shares in ZSMK to UMZ, thus placing total control of Uralmash with UMZ.


Key shareholders in Uralmash, together with the UMZ holding, are Uralmash's management with 18 percent and portfolio investors with 20 percent, including New Century Holding, Merrill Lynch, Chase Manhattan Bank, ING Baring, Credit Suisse First Boston, Creditanstalt International and Uneximbank. Individuals own 9 percent of the plant.


*The remainder of the stock is held by the State Property Fund.


Uralmash investors can exchange their shares for those of UMZ beginning Thursday at a rate of one Uralmash share for five UMZ shares -- the nominal price of UMZ shares being 100 rubles to Uralmash's 500 rubles. "There will be no dilution," Bendukidze promised.


Those who either do not want to change their shares or cannot change them may sell, but Dmitry Solomin, president of Oil Investment House, UMZ's financial consultant, warned that after the restructuring Uralmash's share prices will fall sharply.


Following the share restructuring, UMZ will move forward with the private placement of 4.5 million ordinary shares, Bendukidze said.


The company will conduct the private placement "according to UK legislation among qualified investors," Solomin said.The value of the package is put at roughly $30 million to $45 million.


Although Bendukidze described the price of the offering as far beneath Uralmash's true value, he said it was necessary for Russian industry to win respect on foreign markets.


"It seemed that $35-$40 million is nothing for such a big company," he said. "We just wanted to attach Uralmash to the international capital market. ... Otherwise Russia's heavy industry will die."


The lead managers for the international placement will be Flemings Investment Management and CentreInvest. Merrill Lynch and Troika Dialog are likely to be involved later if necessary, Bendukidze said.


Following the placement, the company intends to issue level-one American Depositary Receipts "in support of placed shares," Solomin said.


Funds from the private placement will be spent on reconstruction and modernization of the plant's steel furnaces, as part of its efforts to keep the metallurgical complex independent from other manufacturers.