Install

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

. Last Updated: 07/27/2016

AvtoVAZ Structure to Be Revised

State arms exporter Rosoboronexport and investment firm Troika Dialog will reorganize the shareholding structure of carmaker AvtoVAZ to end cross-ownership with subsidiaries, the two companies said in a joint news release Thursday.

After the leveraged buyout, which will take 16 to 18 months, Rosoboronexport and Troika Dialog will own 75 percent plus one share in AvtoVAZ, the statement said.

Eliminating the cross-ownership structure should make it easier to attract investment for AvtoVAZ and make the domestic market more competitive in the long term, AvtoVAZ President Vladimir Artyakov said.

Under the plan, which will see ordinary shares held by subsidiaries turned into treasury stock and annulled, AvtoVAZ's market capitalization will be reduced from $2.5 billion to $1 billion, UralSib wrote in a research note last week, when reports about the plan first surfaced.

The reduction in the amount of outstanding shares will result in a boost for AvtoVAZ's earnings ratios. The shareholding structure's revamp means good news for minority shareholders, UralSib said.

When Rosoboronexport took over management of AvtoVAZ in 2005, it had promised to eliminate its cross-ownership structure on the basis of a plan drafted by Troika Dialog, which was reported last week to have bought a 17 percent stake in AvtoVAZ.