Install

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

. Last Updated: 07/27/2016

Mordashov in Power Machines Deal

Itar-TassA Power Machines plant in St. Petersburg. Mordashov beat Deripaska to the stake in the firm owned by Interros.
Steel magnate Alexei Mordashov has bought a 30.4 percent stake in the country's leading turbine maker, Power Machines, from Vladimir Potanin's Interros holding, Interros said Monday.

Mordashov beat out fellow Kremlin-friendly tycoon Oleg Deripaska, who also bid to buy the stake.

Interros spokeswoman Nina Dementsova said Mordashov had acquired the stake through his company HighStat Limited. She would not disclose the value of the deal, saying only that it was based on the turbine maker's current market price.

The deal is estimated at from $470 million to $515 million.

"I believe in Power Machines and am ready to invest intellectual and financial resources in its development," Mordashov said, Interfax reported.

Last week Siemens, which holds a 25 percent stake in Power Machines, relinquished its pre-emptive right to buy Interros' stake after the Federal Anti-Monopoly Service ruled out a sale to the German firm. A 2005 bid by Siemens was rejected on national security grounds, as Power Machines provides turbines to the defense industry.

A few months later, Deripaska won approval for a separate bid for a controlling stake, but talks did not take place.

In the weeks leading up to Monday's announcement, Mordashov, who controls steel company Severstal, was widely expected to emerge as the buyer after sources leaked details of the deal. But Deripaska, controlling shareholder in Basic Element, remained a potential contender after the anti-monopoly service said it had given permission to both Mordashov and Deripaska to bid for the company.

Power Machines, which recorded a net loss of 591 million rubles ($23.6 million) for the first half of 2007, is well positioned to benefit from the billions of dollars in investment into the electricity network after the breakup of state utility Unified Energy System. Analysts say Power Machines will be one of the largest suppliers of power equipment to the new generating companies over the next five to 10 years.

Currently, Power Machines accounts for about 90 percent of Russia's turbine production.

Mordashov is understood to be seeking a 100 percent stake in Power Machines. Deripaska has indicated that he would be looking for an 82 percent stake in the company.

Siemens said in May that it might cut its losses if the value of its holding continued to fall. Since then, Power Machines' share price has risen 9 percent.

A spokesman for Siemens declined to comment Monday.

UES holds a 25 percent stake in Power Machines and is expected to hold an auction for the stake later this year. UES chief executive Anatoly Chubais effectively ruled out in July any sale to a foreign company, saying he wanted to see the stake go to a "Russian, private, strategic investor."

Both Mordashov and Deripaska can be expected to bid for UES's stake, analysts said.

"It is very difficult to imagine that Deripaska and Mordashov would run this company together. There is only room for one," said Gennady Sukhanov, a manufacturing analyst at Troika Dialog. "Mordashov has the advantage ... but I wouldn't exclude that Deripaska could eventually take over Power Machines."