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. Last Updated: 07/27/2016

State Will Buy 11% of Volga-Dnepr

MTThe deal could bring Volga-Dnepr closer to restarting production of the An-124, seen here at the Moscow air show.
Volga-Dnepr, the privately controlled air cargo giant, said Thursday that it would sell an 11 percent stake to state-owned Vneshekonombank early next year.

The airline, which signed an agreement with Vneshekonombank last summer to restart production of its key cargo jet, called the sale a strategic move aimed at expansion.

"We need a large investor that will have the same interests as we do," said Artyom Voskoboinikov, Volga-Dnepr's vice president for corporate development.

Voskoboinikov said that the 11 percent stake would consist of shares currently held by management and that the sale should go through within two months.

The price for the stake is still under negotiation, he said.

The stake is worth around $15 million, said Boris Rybak, the head of Infomost, an aviation consultancy.

Vneshekonombank officials were unavailable for comment Thursday.

The announcement of the sale comes at a time when the state is expanding its presence in strategically important sectors of the economy, most recently in the aviation and machine-building industries.

Volga-Dnepr is the world leader in oversized air cargo, and it counts General Electric, Boeing and international rock stars among its clients.

"It will be a good client for Vneshekonombank that will not only earn money for the bank but will also affiliate it with large-scale projects," Rybak said.

Under president Alexei Isaikin, Volga-Dnepr has been pushing to revive production of giant An-124 cargo planes. Production of the jets stopped in the 1990s as the domestic aviation industry fell into disarray following the Soviet collapse.

Volga-Dnepr and Vneshekonombank signed an agreement during the Moscow Aviation and Space Show in August to revive An-124 production.

Shortly before the signing, Volga-Dnepr's president was elected chairman of the plant where the An-124 was assembled, Ulyanovsk-based Aviastar-SP.

Should production restart, Isaikin has said, the plant could be producing as many as 50 An-124s by 2030, each retailing for $110 million.

Aside from Volga-Dnepr, potential customers for the An-124 include Ukraine's Antonov Airlines and a number of air carriers in the Middle East.

Volga-Dnepr is seeking $400 million to restart production and is hoping to tap a government investment fund meant to finance domestic infrastructure projects, Voskoboinikov said.

The presence of Vneshekonombank as a shareholder should help Volga-Dnepr to stabilize its shareholder structure, Voskoboinikov said.

Airline management holds 45.6 percent. The airline's other main shareholder, the Kaskol aerospace group, has 33 percent and has been looking to offload the stake amid a dispute with management over how to develop the airline.

Kaskol officials were unavailable for comment Thursday.

Volga-Dnepr operates a fleet of 10 An-124s and three smaller Il-76 cargo planes. Its subsidiary, Air Bridge Cargo, flies three Boeing 747 freighters.

Volga-Dnepr said last month that it expected 2005 sales to reach $400 million.