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Uralkali Considers Stock Buyback to Include Largest Owners

Yuliya Fedorinova / Bloomberg (UK)
Uralkali Considers Stock Buyback to Include Largest Owners

OAO Uralkali, the world’s largest potash producer by output, may hold a tender for its stock open to all shareholders, including its main owners, as the company seeks alternative ways to distribute profit to investors.

“We are very likely to announce a tender offer for our stock or another buyback to return cash to shareholders, as our cash position is strong,” Vladislav Baumgertner, chief executive officer, said in an interview in Moscow yesterday. The potential purchases and the terms will be discussed in November, he said.

Billionaire Suleiman Kerimov and Uralkali’s other controlling shareholders, who own a combined 53 percent of the fertilizer producer, can’t participate in the company’s onmarket buyback of as much as $1.6 billion that started in November 2012. Those purchases have helped limit the stock’s decline this year to 5.2 percent at yesterday’s close, compared with a 12 percent slump in Moscow’s benchmark Micex Index.

Uralkali has spent $887 million buying back shares from minority investors. The Berezniki, Russia-based company had $1.6 billion in cash as of June 1, according to a presentation posted on its website. Under a tender, all shareholders, including controlling owners, would be eligible to sell back an amount of stock in proportion to the size of their stake.

“We may think of special dividends too, but we prefer to diversify the means of profit distribution,” Baumgertner said.

Attractive Option

A tender offer is attractive to Uralkali as it will help preserve the proportion of the company’s stock that is freely traded after shares purchased in the buyback and from billionaire investor Zelimkhan Mutsoev are canceled, Baumgertner said.

Uralkali agreed to buy out Mutsoev this month for about $1.3 billion as he reorganizes his finances to meet requirements for Russian lawmakers. Uralkali will fund the acquisition of the stake from cash flow, Baumgertner said. The company may issue bonds or take a loan to “optimize our loan portfolio,” he said.

Uralkali fell 0.4 percent at 221.79 rubles at 4:20 p.m. in Moscow trading.

“Given the current situation on the markets, I would recommend the company refrain from any buybacks to save money,” Elena Sakhnova, a VTB Capital analyst, said by phone today from Moscow. “Should the company still decide on profit distribution, special dividends would be preferable for minority holders.”

The company is the largest producer of potash, a crop nutrient that helps strengthen plants’ root systems. It competes for more than $20 billion in annual sales in the global potash export market with producers including Potash Corp. of Saskatchewan Inc.

Uralkali spent about $863 million buying back stock in a $2.5 billion one-year program that ended in 2012.

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