Uralchem Opts Out of Uralkali’s $1.5 Billion Buyback Program

Bloomberg reported that one of Uralkali’s (LON:URALL) largest investors, OAO Uralchem, has decided not to return shares in the Russian potash company’s $1.5 billion buyback program, leaving behind a large chunk of cash for other investors.

As quoted in the market news:

Uralkali’s buyback surprised investors as the world’s largest potash producer plans 300 billion rubles ($5.9 billion) in investments to help compensate for lost output at a flooded mine that accounts for 18 percent of its annual potash capacity.

“We were studying the possibility a while ago but in the end we decided not to tender shares,” OAO Uralchem Chief Executive Officer Dmitry Konyaev said Tuesday by e-mail. The company sees its investment as “strategic” and is interested in Uralkali’s stable development, he said.

Uralkali, the world’s largest potash producer, plans to repurchase stock at $3.20 a share and $16 a global depositary receipt on a pro-rata basis. Stakes smaller than 500 shares, or 100 GDRs, will be bought back in full. The offer closes May 22. Uralchem holds a 20 stake in Uralkali. Andrey Belyak, spokesman for Onexim Group, which bought about 27 percent in the potash producer in 2013 jointly with affiliates, declined to comment.

The decision means that minority investors, including OAO Acron, may split about $620 million in the buyback instead of $479 million if all shareholders other than Uralchem tender their shares in full, Petropavlovskiy said. Onexim may sell as much as $602 million of stock and Chengdong Investment Corp., which controls 12.5 percent of Uralkali, may get about $278 million, according to BCS’s estimates.

Uralkali rose 1.7 percent to 156.80 rubles as of 11:23 a.m. in Moscow after rising as much as 2.5 percent. That compares with a 0.1% percent decline in the Micex Index of 50 stocks.

Dmitry Osipov, CEO of Uralkali, commented:

If any of the major shareholders do not participate in the program up to their full pro-rata share, the minority shareholders will have an opportunity to receive a higher allocation under the program. We plan to finance the deal using our own cash.

Click here to read the full Bloomberg report.