Russian potash miner Uralkali to buy Silvinit

MOSCOW (BestGrowthStock) – A Russian billionaire moved on Monday to create the world’s second largest potash miner by uniting Russia’s top two producers, Uralkali (URKA.MM: ) and Silvinit (SILV.MM: ), in a $1.4 billion deal.

Uralkali, which like Silvinit is effectively controlled by Russian mining-to-banking tycoon Suleiman Kerimov, offered to buy rival Silvinit (SILV.MM: ) for cash and shares.

Uralkali’s offer for 20 percent of Silvinit, or 1.57 million ordinary shares is at $894.5 per share, which compares with the $940 price on Moscow’s dollar-denominated RTS exchange (SILV.RTS: ). The total cash price would be $1.4 billion, they said.

The merger of the two companies will then be completed through a share swap.

Shares in Silvinit fell 9 percent in Moscow on the news, while Uralkali stock added around 2 percent.

Analysts at Uralsib estimated that the deal valued Silvinit at a 35 percent discount to Uralkali. They said it was far from a merger of equals.

“They (the terms) don’t look very good for Silvinit, it values the business at about 40 percent discount to Uralkali…That’s in the interest of Uralkali shareholders,” said Bob Kommers, analyst at Deutsche Bank.

“They are buying a similar asset at a significant discount, which is very attractive (for Uralkali). There are some operational synergies, which are in line with our estimates. Those are the main benefits.”

Uralkali said the deal had already gained the support of 53 per cent of its ordinary shareholders and from 67 percent of Silvinit’s. Silvinit’s board recommended that shareholders approved the deal at a February 4 meeting.

With no debt, Uralkali should have no problem financing the cash part of the deal and could issue a rouble bond or get a loan, Kommers said.

(Editing by Jane Merriman)

Russian potash miner Uralkali to buy Silvinit