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. Last Updated: 07/27/2016

Titanium Giant May Sell Stake to State This Year

The world's top titanium maker, VSMPO-Avisma, may sell a stake to the government this year as the Kremlin seeks to tighten control over strategic assets, the company's co-owner said Friday.

"I think it may became a shareholder by the end of this year," Vladislav Tetyukhin, VSMPO-Avisma general director, said on the sidelines of a news conference at the company's main production plant in the Ural mountains.

Shares of VSMPO on the RTS fell $13, or 5.1 percent, to $240 on Friday, the biggest one-day drop since April 25. The stock has gained 20 percent this year, valuing the company at $2.8 billion.

State-owned arms trader Rosoboronexport has said it wants to buy at least a blocking stake -- 25 percent plus one share -- in VSMPO-Avisma, a major supplier of titanium products to aerospace companies like Boeing and Airbus.

Tetyukhin did not specify to which state body VSMPO-Avisma might sell a stake, but he said talks had taken place with Rosoboronexport and various government ministries.

Tetyukhin and VSMPO-Avisma chairman Vyacheslav Bresht together hold a 60 percent share of the company.

Asked how much they would be willing to sell, Tetyukhin said: "This has not yet been discussed."

"There are negotiations going on. We're trying to understand each other's language.''

Bresht has previously stated he would be willing to sell his stake. He said this month that supply contracts with Airbus that run to 2012 and with Boeing to 2013 should dispel fears that any change in ownership might affect supplies, Reuters reported.

VSMPO-Avisma would supply 40 to 45 percent of the titanium products used by Boeing next year, Bresht said on May 10, and the company has won a 60 to 70 percent share of contracts to supply Airbus.

It has also formed a joint venture with Boeing, in which both companies will invest $30 million, to supply the U.S. aviation giant with components for its new Dreamliner jets.

VSMPO-Avisma plans to invest $650 million to raise output of titanium products to 35,900 tons by 2010, up 66 percent from last year, Tetyukhin said Wednesday.

The company, which plans a foreign listing next year, would increase exports to 28,900 tons from 17,300 tons in the same period, he said.

"The state is continuing to establish control in strategic sectors of the economy and in the defense industry,'' Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies, a defense think tank, said Friday. "This is the first metals asset they will be taking after acquisitions in the machine-building industry."

Rosoboronexport is headed by Sergei Chemezov, who served in the KGB in the former East Germany at the same time as President Vladimir Putin.

(Reuters, Bloomberg)