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IKAR in Mass and Industry Media


United Grain Values Shares Before Sale to Russian Investor

Bloomberg, 02.06.12


May 21 (Bloomberg) -- Russia plans to cede almost half of state trader United Grain Co., valued at at least 5.4 billion rubles ($174 million), to a domestic investor as the government aims to keep control of the world's third-largest wheat exports.

United Grain was valued at 1,547 rubles a share, the trader said today, citing an appraisal report. Bids are due from two investors this week for 3.51 million new shares, which will be equivalent to 50 percent minus one share after the sale.

Russia is raising funds to develop port, rail and storage infrastructure and revive agriculture about three decades after the cost of grain imports helped push the Soviet Union to the brink of bankruptcy. Russia is set to become the third-biggest wheat supplier this season with exports reaching 21 million metric tons, according to the U.S. Department of Agriculture.

United Grain and Troika Dialog, its investment adviser, selected bidders with port or storage assets, excluding international traders because the company is ``strategic'' for national security, said Troika President Ruben Vardanian.

"We are bringing in a strategic investor to develop United Grain and keep it a national company during its moment of growth," the trader's Chief Executive Officer Sergei Levin said. About half of Russia's grain exports are already controlled by transnational companies, he said.

Businessman ZiyavudinMagomedov'sSumma Group, an investor in Russia's biggest port operator, and billionaire VadimMoshkovich's agricultural producer Ros Agro Plc were shortlisted to bid, according to Levin.

Real Test

The recommended criteria for the bidders included ownership of 500,000 metric tons of grain storage capacity or at least a 25 percent stake in sea or river ports with grain-handling capacity of 1 million tons, Vardanian said. Of 20 companies contacted, only Summa was interested and met that requirement, he said. The bidding was then opened to others.

"The real test will be to see if a larger degree of private ownership will increase investments in their logistical infrastructure and increase efficiencies of the trading groups," Dan Hofstad, a risk management consultant focusing on the CIS and Black Sea region at London-based INTL FCStone Inc., said by e-mail on May 18.

United Grain owns at least 1.2 million tons of silo capacity and controls a terminal with capacity of 4.5 million tons a year at the Novorossiysk harbor on the Black Sea. Summa, through its interest in the port operating group OAO Novorossiysk Commercial Seaport, runs a nearby grain terminal.

Equal Access

United Grain will receive the proceeds from the stake sale and use them to fund expansion, Vardanian said. The company plans to invest about 17 billion rubles in 2011 through 2013 to expand its port handling capacity to 16 million tons and silo storage to 8.4 million tons by 2015.

Russia's Agriculture Ministry expects total grain exports to rise to 27 million tons this marketing year, and targets an increase to 40 million tons by 2020.

"Whoever wins the bid, it's important that all agricultural producers are provided equal access to the grain-market infrastructure," said Dmitry Rylko, head of the Institute for Agricultural Market Studies, or IKAR.



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