stake in russia's uralkali likely to be sold

http://online.wsj.com/article/SB10001424052702303722604579111380446067174.html
Stake in Russia's Uralkali Likely to Be Sold to Local Buyer
October 2, 2013, 1:07 p.m. ET

By ALEXANDER KOLYANDR

MOSCOW—A large stake in Russian potash giant Uralkali URALL +3.32% is likely to be sold to one of several wealthy local investors bidding for the embattled company, despite interest from some potential foreign bidders, people close to the discussions said Wednesday.

The people said that the Kremlin is eager to repair a rift with neighboring Belarus that led to the collapse of an informal global price cartel in the vital fertilizer additive potash and the arrest in Minsk in August of Uralkali's chief executive on charges of abuse of office that the company has dismissed as political.

The people said the Kremlin has made clear to potential bidders that some kind of sales cooperation with Belarus—a close ally of Moscow that depends heavily on potash for export revenues—should be restored after any deal. In July, Uralkali said it would no longer seek to maintain high prices by limiting production, shifting instead to a strategy aimed at boosting volume in a push to win market share. The change hammered the share prices of potash producers around the world.

Suleiman Kerimov, the Russian tycoon who holds a 21.7% stake in Uralkali through his Swiss-based foundation, is willing to sell his stake to help resolve the tensions with Minsk, provided a buyer pays what he considers a fair price, valuing the entire company around $19 billion to $20 billion, other people familiar with Mr. Kerimov's thinking said. That is well above current market prices of about $16 billion, however.

Several other Russian tycoons have expressed interest in buying Mr. Kerimov's stake, as well as smaller ones held by several other major shareholders, bringing the total stake on offer to as much as 35%, according to those people.

Sovereign-wealth funds and other investors from Asia had also expressed interest in buying smaller stakes, according to those close to the talks, but the Kremlin is eager to keep the strategic company under local control, they said.

China Investment Corp., Beijing's sovereign-wealth fund, took a 12.5% stake in Uralkali last month by exercising an option to convert bonds it had purchased. The move gives China, one of the world's largest consumers of potash, a seat on Uralkali's board. People close to the talks said Beijing had sought to increase its holding to 25%, but was rebuffed by Russian officials. National governments have typically defended against foreign ownership of potash producers.

Publicly, Kremlin officials say the sale is a private matter. But President Vladimir Putin has discussed the case of the jailed CEO Vladislav Baumgertner several times in recent weeks with his Belarusian counterpart, Alexander Lukashenko. Belarusian authorities later released the Uralkali CEO from jail to house arrest and Russian officials have expressed hope in recent days that the conflict will be resolved soon.

Write to Alexander Kolyandr at [email protected]