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. Last Updated: 07/27/2016

Deripaska 'Likely' to Win Power Bid

VedomostiIgor Artemyev
Oleg Deripaska's Basic Element could win government approval to buy Russia's biggest maker of power turbines, Siloviye Mashiny, or Power Machines, from Interros as soon as next month, when a decision is expected on its bid.

"Regarding Basic Element's application, we will deliver the decision by mid-June," Interfax quoted Igor Artemyev, head of the Federal Anti-Monopoly Service, as saying Tuesday. "Most likely it will be positive."

"The buyer has to agree with [Interros head Vladimir] Potanin, as maybe he does not want to sell the controlling stake," Artemyev said.

His comments came after the anti-monopoly service in April rejected a bid made last year by German electronics and engineering giant Siemens to buy 73.5 percent of Power Machines, on the grounds that a sale to foreign buyer would limit competition in the energy equipment market and jeopardize defense production.

Divisions of Power Machines make generators for nuclear submarines, components for Topol-M intercontinental ballistic missiles and Proton booster rockets.

As talks on a sale to Siemens dragged out without decision, Basic Element, a holding company belonging to Deripaska, made its own bid for Power Machines earlier this year.

After its buyout plan fell through, Siemens said it was still interested in a stake in the company and Russian media reported that Potanin was considering selling a blocking stake in the turbine maker to Siemens.

Siemens declined to comment.

"We are still looking how to further develop this asset," said Interros spokesman Mikhail Barkovets.

Irina Kashunina, a spokeswoman for the anti-monopoly service, said Tuesday no new bids were received from Siemens or any other company.

Basic Element did not return a call requesting comment. But a company source, speaking on condition of anonymity due to the ongoing bid, said, "We expect the anti-monopoly service will clear our request to buy shares in Power Machines."

He said that Basic Element had not held any recent talks with Interros.

"We had negotiations last fall and the understanding was that we should first win approval from the anti-monopoly service and then we could begin more detailed negotiations. We are waiting for this approval," he said.

He did not rule out further cooperation with Siemens, but added, "They are not the only firm on the market and they do not have the best technologies either. There's General Electric, for example, and we have had contacts with them."

"This is a technical announcement [by the anti-monopoly service] that means they do not have the grounds to reject Basic Element's bid," said Vyacheslav Smolyaninov, an analyst with Uralsib investment bank.

Potanin will likely have no choice but to sell Power Machines to Deripaska, said Sergei Suverov, head of research at Gazprombank.

"And for Deripaska, it would be a logical move, as Power Machines makes energy equipment and he has energy assets," Suverov said. "He also has experience in managing machine building through his company Ruspromavto."

With Power Machines' defense component, Deripaska would be able to expand his defense business.

Through Ruspromavto, which controls automaker GAZ, Basic Element owns the Arzamas machine-building plant.

Last month, Ruspromavto failed in a bid to acquire 50 percent in Kurganmashzavod, Russia's only maker of armored infantry fighting vehicles.