Completion of Combination between Uralkali and Silvinit

16.06.2011
Completion of Combination between Uralkali and Silvinit

OJSC Uralkali ("Uralkali") is pleased to announce completion of its combination with OJSC Silvinit ("Silvinit") (the "Combination").

The Combination created one of the world’s leading potash companies, a leading global fertilizer producer and one of Russia’s leading mineral resource companies. The Combined group owns an attractive portfolio of development opportunities, including existing brownfield and greenfield development projects, will enjoy a global sales reach and benefit from a cost structure that is amongst the lowest in the potash industry. The Combination is expected to lead to significant synergies, including, among other things, operational, SG&A and transportation efficiencies and integrated development of the asset base.

Commenting on the completion of the Combination, Vladislav Baumgertner, Chief Executive Officer of Uralkali, said:

"We are delighted to announce completion of the Combination between Uralkali and Silvinit, creating one of the leading global potash companies. Following the Combination of the two leading Russian potash businesses which have a natural strategic fit, Uralkali is now looking forward to realizing the opportunities available to the Combined group in this highly dynamic industry and believes that the Combination will bring considerable long term benefits for shareholders, employees and customers of the Combined group."

Summary of the Combination

  • The Combination was effected through the acquisition by Uralkali of 1,565,151 Silvinit ordinary shares, representing approximately 20 % of Silvinit ordinary share capital, and implementation of a statutory merger of Silvinit into Uralkali through the issuance of Uralkali ordinary shares for the remaining ordinary and preferred share capital of Silvinit.
  • On 4 February 2011 Uralkali shareholders representing 98.9% and Silvinit shareholders representing 90.9% of the votes cast at the respective extraordinary shareholders meetings of Uralkali and Silvinit voted to approve the Combination.
  • On 24 and 25 February 2011 Uralkali secured the financing of the acquisition of the 20 % stake in Silvinit’s ordinary share capital, which was subsequently completed on 28 February 2011.
  • On 25 March 2011 Uralkali and Silvinit boards approved the reports for the redemption of shares submitted for redemption by the shareholders who voted against or did not participate in voting on reorganization and/or approval of major transactions by the shareholder meetings held on 4 February 2011, with as little as 121,330 Uralkali ordinary shares, 430 Silvinit ordinary shares and 3,471 Silvinit preferred shares submitted for redemption.
  • The Combination was approved by competition authorities in Russia, Ukraine, China, Brazil and Poland.
  • On 17 May 2011 the Russian tax authorities registered the termination of Silvinit in the Unified State Register of Legal Entities, and 970,247,905 newly issued Uralkali ordinary shares were distributed to all former shareholders of Silvinit, other than Uralkali, by way of conversion in connection with the Combination.
  • Silvinit shareholders received 133.4 Uralkali ordinary shares for each ordinary share in Silvinit and 51.8 Uralkali ordinary shares for each preferred share in Silvinit. 1,565,151 Silvinit ordinary shares acquired by Uralkali on 28 February 2011 from a shareholder of Silvinit for cash consideration as well as Silvinit preferred and ordinary shares submitted for redemption were cancelled as required by Russian law.
  • On 26 May 2011 Uralkali Board of Directors approved reports on results of the share issuances that reflect results of the share conversion in connection with the Combination.
  • On 15 June 2011 the reports on results of the share issuances were registered by the Federal Service for Financial Markets of the Russian Federation ("FSFM") and newly issued Uralkali shares distributed to former shareholders of Silvinit became fully transferable.

2011 Annual General Shareholders Meeting of Uralkali

Silvinit's former shareholders that received Uralkali shares as a result of the share conversion are eligible to (i) participate in the upcoming annual general shareholders meeting of Uralkali on 29 June 2011 and vote on all items of its agenda, including election of the new Board of Directors of Uralkali, and (ii) receive annual dividend if approved by the annual general shareholders meeting of Uralkali.

GDR Program

The depositary under Uralkali global depositary receipts ("GDRs") program will accept deposits of the newly issued Uralkali shares into the GDR program starting from the GDR re-listing date. Uralkali expects that GDRs will be admitted to the Official List of the UK Listing Authority and to trading on the regulated market of the International Order Book of the London Stock Exchange on or about 21 June 2011.

Shareholder Structure of Uralkali

The shareholders of both Uralkali and Silvinit overwhelmingly supported the Combination at their respective extraordinary shareholder meetings on 4 February 2011. Post issuance of new shares, Uralkali benefits from a strong core shareholder base supportive of the Uralkali’s strategy going forward. Furthermore, public market shareholders will benefit from improved liquidity given the issuance of new Uralkali shares and expected increase in the GDR program limit to 25%. A table reviewing the shareholder structure as at 24 May 2011 is presented below:

Shareholders % of share capital
Shareholders ultimately controlled by Mr. Suleiman Kerimov:
Kaliha Finance Ltd (9.49%) 17.16 (1)
Gereniaco Limited (7.67%)
Shareholders ultimately controlled by Mr. Alexander Nesis:
Aerellia Investments Limited (4.41%) 12.16
Chierno Construction Ltd (3.33%)
Aliquantium Limited (3.09%)
Terikla Holdings Limited (1.33%)
Shareholders ultimately controlled by Mr. Zelimkhan Mutsoev:
Forman Commercial Limited 8.10
Shareholders ultimately controlled by Mr. Anatoly Skurov:  
Fenguard Ltd 7.76
Shareholders ultimately controlled by Mr. Filaret Galtchev:  
Becounioco Holdings Limited (5.49%)  
Cosmopro Trading Limited (4.81%) 10.30(2)
Other(3) 44.52
Total* 100
* Total number of Uralkali ordinary shares post Combination 3,094,637,905, including 121,330 Uralkali shares submitted for redemption and remaining on Uralkali’s balance sheet.
(1) Including 6.24% of Uralkali share capital that was transferred to OJSC Sberbank under a repo agreement with voting rights being exercised by the initial holder of the repo shares by proxy.
(2) Including 4.81% of Uralkali share capital that was transferred to OJSC Sberbank under a repo agreement with voting rights being exercised by the initial holder of the repo shares by proxy.
(3) Includes 15.43% of Uralkali share capital held by The Bank of New York Mellon as of 14 June 2011, as depositary under Uralkali's GDR program, 0.8% of Uralkali share capital held by LLC SP Kama, a wholly-owned subsidiary of Uralkali, and 1.25% of Uralkali share capital transferred to OJSC Sberbank under repo agreements with voting rights being exercised by initial holders of such repo shares by proxy.

Enquiries:

Investor Relations
Anna Batarina, CFA
Vice President, Investor Relations, Uralkali
Tel.: +7 (495) 730 2371
E-mail: anna.batarina@msc.uralkali.com

Media Relations
Alexey Sotskov
Head of Media Relations, Uralkali
Tel.: +7 (495) 730 2373
E-mail: alexey.sotskov@msc.uralkali.com

Brian Cattell / James Devas
Maitland Communications
Tel: +44 (20) 7379 5151
E-mail: bcattell@maitland.co.uk

Financial Advisors
Alexander Metherell / Andrew Hollins / Giles Coffey
VTB Capital plc
Tel: +44 (20) 3334 8000

Mark Sorrell / Tav Morgan / Konstantin Koudriaev
Goldman Sachs International / Goldman Sachs (Russia)
Tel: +44 (20) 7774 1000 / +7 (495) 645 4000

IMPORTANT NOTICES

General

This announcement is not intended to, and does not constitute, or form part of, an offer to sell or an invitation to purchase, exchange or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction. This announcement does not constitute a prospectus or a prospectus equivalent document.

VTB Capital Plc ("VTB Capital") and Goldman Sachs International, each of which is authorised and regulated in the United Kingdom by the Financial Services Authority, as well as Goldman Sachs (Russia) (together with Goldman Sachs International, "Goldman Sachs"), are acting exclusively for Uralkali and no one else in connection with the Combination and will not be responsible to anyone other than Uralkali for providing the protections afforded to their respective clients, nor for providing advice in relation to the Combination, the contents of this announcement or any other matter referred to herein.

VTB Capital, Goldman Sachs and their affiliates have had, may continue to have and may continue to seek to have, commercial or investment banking relationships with the principal parties to the transaction and their respective affiliates and, subject to the respective information barriers and relevant compliance and regulatory procedures, may actively hold debt and equity securities and other instruments for its own account or for the accounts of its customers.

Overseas jurisdictions

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with English law and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England. Except as required by applicable law, copies of this announcement are not being, and may not be, mailed or otherwise forwarded, distributed or sent in, into or from any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure if information concerning the Combination is sent ("Restricted Jurisdiction"). Persons receiving this announcement should observe these restrictions and should not send or distribute documents in or into any Restricted Jurisdiction.

Notice to U.S. investors

It is important for U.S. securities holders to be aware that this announcement is subject to disclosure and regulations in England that are different from those in the United States. In addition, U.S. securities holders should be aware that this announcement has been prepared in accordance with English format and style, which differs from the U.S. format and style.

It may be difficult for U.S. securities holders to enforce their rights and any claim they may have arising under the U.S. federal securities laws, since Uralkali is located in the Russian Federation, and some or all of its officers and directors may be residents of countries other than the United States. U.S. securities holders may not be able to sue a non-U.S. company or its officers or directors in a non-U.S. court for violations of the U.S. securities laws. It may be difficult to compel a non-U.S. company and its affiliates to subject themselves to a U.S. court's judgment.

Securities may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an exemption from such registration. The Uralkali shares issued in connection with the Combination are not, and will not be, registered under the Securities Act or under the securities laws of any jurisdiction of the United States and were issued to Silvinit shareholders in the United States in reliance on the exemption from registration provided by Rule 802 under the Securities Act and in reliance on available exemptions from any state law registration requirements. The securities of Uralkali have not been, and will not be, registered under the Securities Act or under the securities laws of any jurisdiction of the United States.

No profit forecast

Nothing in this announcement is intended to be, or is to be construed as, a profit forecast or to be interpreted to mean that earnings per Uralkali share or Uralkali GDR for the current or future financial years will necessarily match or exceed the historically published earnings per Uralkali share or Uralkali GDR.

Forward looking statements

This announcement, including any information included or incorporated by reference, may contain "forward-looking statements" concerning Uralkali. Generally, the words "will", "may", "should", "could", "would", "can", "continue", "opportunity", "believes", "expects", "intends", "anticipates", "estimates" or similar expressions identify forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Uralkali operations and synergies resulting from the Combination; and (iii) the effects of government regulation on the business of Uralkali. Many of these risks and uncertainties relate to factors that are beyond the companies' abilities to control or estimate precisely, such as future market conditions and the behaviours of other market participants, and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. Uralkali assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law and as set out under "General" above.

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