16 Apr 2010 13:10

PhosAgro eyeing IPO that may include state stake in Apatit

MOSCOW. April 16 (Interfax) - PhosAgro, one of the least transparent companies in the Russian chemicals sector, is mulling an IPO that may feature the state's shares in subsidiary OJSC Apatit , three investment bankers at Western bank subsidiaries in Russia have told Interfax.

"The company has already had a series of meetings with banks to discuss the possibility of placement," one of the bankers said.

A scheme for exchanging the government's Apatit stake (20% of share capital or 26.67% of common shares) for shares in the holding itself, another banker said. The government would thereby receive shares in PhosAgro equivalent to its stake in Apatit, and then put in on the market. That is one possibility, the source said.

"Everything associated with government approval is not done quickly. A share swap might be effected either pre-IPO or after. This variant is being looked at. The company is interested in the government's opinion and investors' views of this scheme," one banker said.

On Friday, the Vedomosti business daily reported that PhosAgro had sent a letter to Prime Minister Vladimir Putin proposing to exchange the government's Apatit stake for one in PhosAgro. The idea is that the government would get an equivalent-value stake in the holding, while Apatit would retain "the right of the golden share." If such a deal were struck, the government use its own discretion in handling the stake, including putting it up for sale on Russian or foreign markets.

The company has not yet put together any specific proposals nor any sort of timeframe for placement. PhosAgro has not commented on these reports.

Meanwhile, PhosAgro "will be technically ready in three months" for an IPO, company General Director Maxim Volkov told Interfax. PhosAgro is talking the possible placement with "more than ten banks," including Credit Suisse, Deutsche Bank, Troika Dialog, and VTB Capital, Volkov said. Volkov also confirmed the existence of the letter Vedomosti reported sent to Putin, but declined to comment in more detail.

A source in banking circles told Interfax that the expected placement volume ranges from $600 million to $1 billion.

Analysts say PhosAgro shares would interest investors. Troika Dialog analyst Mikhail Stiskin estimated the holding's value at $7 billion. "PhosAgro is definitely an interesting company, a world-level company. The makeup of its assets offers an opportunity for clients to make a mark on the phosphate fertilizer market," he said.

Uralsib analyst Anna Kupriyanova said PhosAgro could cost $6 billion. She said that chemicals-sector companies are very attractive to investors right now, and points in PhosAgro's favor are that it has no debt problems and no need for significant investment. "Demand for a company like this will be high, especially in the event of a successful URALCHEM placement," she said.

On the eve of its IPO, URALCHEM was valued by one of the placement organizers at $2 billion. Uralkali' capitalization now stands at about $10 billion, and Acron's at $1.8 billion.

PhosAgro does not officially identify its beneficiaries, does not publish consolidated financial reports, and does not have any public debts. In mid-2008, the company announced for the first time that it was considering placing eurobonds in the amount of $50-$100 million, possibly in 2010-2011, but that it was not considering an IPO. The company has been preparing its financial reports to international standards since 2005, Volkov said.

The company announced a new appointment on Wednesday, with Sergei Pronin becoming first deputy general director of the management company CJSC PhosAgro AG. One of Pronin's duties, the company said, would be "increasing the transparency of company activities for the business and investment communities."

Unconfirmed reports say Senator from Murmansk region Andrei Guryev is the company's owner.

In the holding PhosAgro are OJSC Apatit, OJSC Ammophos , OJSC Cherepovets Azot, and LLC Balakovo Mineral Fertilizers.