Russia's Gazprom sells control in Sibur for $2.3 billion

Top managers of Russia's petrochemical business Sibur have agreed to buy a controlling stake in the company from Russia's Gazprombank, a subsidiary of the country's energy behemoth Gazprom, for Rb53.5 billion ($2.3 billion), the parties in the deal said April 29.

Cyprus-registered Hidron Holdings Limited, which represents Sibur president Dmitry Konov and four other executives, on April 29 signed a preliminary agreement with Gazprombank on the purchase of the 50% plus one share stake in Sibur.

As part of the deal, which is yet to be approved by the Gazprombank board of directors, Sibur is also to pay Gazprombank and the other existing shareholders dividends amounting to 25% of net income for 2007, Gazprombank and Hidron Holdings Limited said in the statement.

"Total amount to be paid by the buyers, including Sibur's current net debt and the dividend obligations, will be about $5.4 billion," the statement said.

Hidron Holdings Limited is to pay Rb16.6 billion to Gazprombank immediately after the preliminary terms of the deal have been completed and further Rb11.9 billion within three months after the deal has been sealed.

The remainder will be financed by Gazprombank's loans, which are to be redeemed within three years after the signing of the deal.

Gazprombank currently owns 70% of Sibur, with Gazfund owning 25% and the balance 5% owned by Russia's Treasury Stock.

Under the deal, Sibur's managers will also have an option to buy the remaining 20% stake from Gazprombank at the price of the deal within three years.

Before the entire payment has been made, the Sibur management will be restricted from using Sibur's petrochemical assets to secure loans for buying out the shares.

The Sibur management last week announced that they were interested in buying the controlling stake in the company from Gazprombank and took time off from their current roles, while the proposal for the shareholders was prepared and negotiations were undertaken.

Anatoly Ezhkov, vice president for security and government relations, was appointed as temporary president for this period.

Analysts with Renaissance Capital said in a note April 29 that the deal marked "the continuation of Gazprom's restructuring process and clears up Gazprombank's structure ahead of its widely expected IPO."

"The deal price is 10% below our valuation of $6 billion, but the two valuations may not be directly comparable, as the future ownership of at least two parts of Sibur (its tire and fertilizer businesses) is yet to be decided," Renaissance Capital said, citing an article in business daily Kommersant.

Sibur Holding is the largest petrochemical business in Central, Eastern Europe and the CIS, and includes 34 operations ranging from the processing of gas to the manufacture of consumer products.

The company plans to invest Rubles 40.9 billion ($1.75 billion)in 2008 to improve and build new petrochemical assets.

New builds include a new polyethylene complex with a capacity of between 450,000-500,000 mt/year, in the Astrakhan Region, located in the Caspian Lowlands of southwestern Russia, and propylene and polypropylene plants (500,000 mt/year PP unit to be fed by a propane dehydrogenation plant using LPG supplied by Tobolsk-Neftekhim) at Tobolsk.

In addition, the company would be expanding its steam cracker and build a new PVC plant in Nizhny Novgorod region. The cracker currently has a 240,000 mt/year ethylene capacity.

It will be expanded to 360,000 mt/year by the end of 2010, in line with RusVinyl's new 330,000 mt/year PVC plant (of which 300,000 mt/year is suspension grade PVC and 30,000 mt/year is emulsion grade).

The company was also in the process of constructing a new 50,000 mt/year expandable polystyrene plant at Sibur-Khimprom CJSC in the Perm region, with further expansion to a total of 100,000 mt/year in the future.

Sibur will also revamp and construct new polymer plants at Tomskneftekhim, as well as revamp and expand its rubber sites. Currently, Tomskneftekhim operates a polyethylene complex which produced around 200,000 mt of resins in 2007.

For the year 2007, the company recorded revenue of Rubles 142.7 billion, up 17% on the year, with net income for the year increased to a record Rubles 22.3 billion, up 4.2% from Rubles 21.4 billion in 2006.

Created: May 2, 2008

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