MOSCOW, August 31 (RIA Novosti) Russia attempting to create another global monopoly / MiG orders set to reach $4.5 billion / Austrian bank buys veteran Russian brokerage firm / Major political deal closed on Russian media market / Japan makes up for failure on Russian energy market
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Russia attempting to create another global monopoly
Having failed to pull off an ambitious merger between Russian steel giant Severtsal and the world's second-largest steelmaker, Arcelor, Russia's metallurgical industry is once again poised to establish itself in the global arena.
Shareholders of Russia's largest aluminum companies, RusAL and SUAL, and Swiss company Glencore have reportedly announced plans to integrate alumina and aluminum production assets worth over $30 billion into RusAl.
According to sources close to the Russian participants in the deal, RusAl will float an additional issue of shares, to be paid for with shares of SUAL and Glencore's aluminum and alumina plants.
Oligarch Oleg Deripaska will control 64.5% in the "greater" RusAL, and shareholders of SUAL and Glencore will receive 21.5% and 14%, respectively. A technical evaluation of all assets should be carried out in September, and a corresponding agreement is due to be signed by October.
The merger will create the world's largest aluminum producer, rivaling the world leader, U.S. Alcoa. The new aluminum giant is expected to produce 4 million metric tons of aluminum and 11 million metric tons of alumina annually.
The Russian government is sure to support a potential aluminum champion. Russian Industry and Energy Ministry officials said recently that small companies alone could no longer drive the country's metallurgical sector. They said only large businesses and government could meet the challenges and risks of economic growth.
However, experts are worried about the government's stake in the three-way transaction. According to Finance Minister Alexei Kudrin, "to meet the competition from developed countries and the rapidly growing Chinese market, Russia must commercialize the Far East's mineral and energy resources." He said the government could meet this challenge with the help of large state-owned companies.
A number of large companies from various sectors have recently been moving toward state control, including energy giant Gazprom and oil company Rosneft, and the government is also planning to create a large mining holding on the basis of Russian diamond monopoly Alrosa. The potential emergence of an independent aluminum giant would be an exception.
MiG orders set to reach $4.5 billion
Yemen will purchase another 32 MiG-29 SMT fighter planes worth $1.3 billion from Russia, in addition to 20 aircraft of the same type delivered earlier.
When added to Indian plans to spend $1 billion upgrading its MiG fighters, the MiG Corporation's order book may reach $4.5 billion. The figure is below Sukhoi's, but the gap is narrowing.
The deal, reported by a source close to Rosoboronexport, the state arms dealer, was confirmed by another source in Russia's aircraft industry.
The source said the contract could be signed before year's end. Yelena Fyodorova, a spokeswoman for the Russian Aircraft Building Corporation (RSK) MiG, said that in the first quarter of 2007, a $1bln contract to upgrade 66 MiG-29s in the Indian Air Force is expected to be finalized.
The sources declined to comment officially on the Yemeni contract.
New purchases of multi-role aircraft are meant to update Yemen's ageing fleet, which consists of United States F-5E and Soviet MiG-21 and Su-20/22 fighters, said Konstantin Makiyenko, an analyst with the Center for Analysis of Strategies and Technologies.
If the Yemeni contract is signed, the center estimates that, taking into account earlier Indian orders for 16 MiG-29K shipboard fighters and Algerian orders for 34 MiG-29 SMTs, the number of firm orders for MiG aircraft will reach 82, and RSK MiG's orders will grow to almost $4.5 billion.
However, Sukhoi planes still command a higher price and the company has more orders, Makiyenko said. Orders to deliver 88 units of the Su-27/30 family to Malaysia, India, Algeria and Venezuela already exist or will soon be finalized. In addition, 120 Su-30s will be built under a licensing agreement in India.
With the licensed aircraft factored in, the value of about 200 Su-27/30s expected to be built will reach some $8 billion, Makiyenko said.
Viktor Moiseyev, head of a division of MDM Bank, said RSK MiG's position is improving. He said the growth in orders will favorably influence cash flows and, as a result, its asset evaluation ahead of the company's incorporation into a United Aircraft Building Corporation.
Austrian bank buys veteran Russian brokerage firm
CAIB, a subsidiary of Bank Austria Creditanstalt, has bought Aton brokerage, one of the oldest on the Russian market, according to financial market sources in Russia. The deal may have been closed long ago, but the information was withheld so as not to scare off the company's clients.
Sale rumors have been circulating for more than a year. At first Goldman Sachs, one of the world's largest brokerages, was mentioned as a potential purchaser. Then came the names of Morgan Stanley, J.P. Morgan Chase and Merrill Lynch.
"They may not have agreed on the price," said a source commenting on a series of sales that were not completed. In May, news agencies, quoting UniCredit board member Erich Hampel, reported that the potential buyer - Bank Austrian Creditanstalt - and Aton were negotiating from a starting price of 300 million euros. In July, news emerged that the parties had practically agreed on the purchase of a part of the stake and an option on the remainder.
Aton is keeping silent on the news. "The delay in making an official announcement can be explained by the company's reluctance to frighten its clients off," said a source. "One justification may be the complex structure of Aton's property, which takes time to understand and unravel," said another informed source among market players.
Experts disagree on the price. "I heard the company was priced at between 200 and 500 million euros," one of them said.
"The price of 300 million euros is quite realistic. It is the sum total of company's own capital, brand and client base," said another.
"The figure is too high, I do not believe in such a sum," a third said.
The foreign bank's interest is obvious: to buy a company is easier than to build one from the ground up. "In order not to lose dumping money by attracting clients from old-time players, one buys a professional team and a client base," the source said.
Major political deal closed on Russian media market
The results of what seems to be the most sensational media market deal this year were announced on Wednesday. Billionaire Alisher Usmanov, who co-owns two major iron and steel enterprises, Metalloinvest and Gazmetall, bought Kommersant publishing house, which had previously belonged to disgraced oligarch Boris Berezovsky.
Market players said Usmanov, who had previously helped energy giant Gazprom to return its assets, and who now deals with Gazprom debtors, is acting in the interests of the natural gas monopoly. Political scientists told the paper this deal would benefit the Kremlin.
Iron and steel tycoon Usmanov also worked for Gazprominvestholding, a 100% Gazprom subsidiary, which manages the monopoly's noncore assets.
Usmanov said the entire deal's $200-million price takes into account the market value of Kommersant publications, the value of its assets and profits, as well as that of its media and real estate, namely, 6,000 sq m in Moscow and 1,500 sq m in St. Petersburg.
Media market players also said Kommersant publishing house was worth about $200 million. "Any higher non-market price has either PR or political aspects," Yury Rovensky, general director of RosBiznesKonsulting information agency, told the paper.
Experts said Usmanov is acting in the interests of Gazprom because media is a noncore business for him. Alexei Volin, president of the Publishing House of Rodionov, said Gazprom finds it inconvenient to buy this asset because Gazprom-Media has no extra money; and Gazprombank, which controls the media holding, faces restrictions with regard to major deals.
Usmanov has always been linked with Gazprom. Alexei Makarkin, chief analyst at the Center of Political Technologies, said Usmanov would "heed Gazprom interests, to say the least." Usmanov, who has cooperated with Gazprom since the 1990s, maintains positive relations with the company's current management, Makarkin told the paper.
Another bidder, who wanted to buy Kommersant, said the Gazprom-Media position on the deal is motivated by reluctance to associate an influential independent newspaper with the state. "I believe this deal was coordinated with the Kremlin, which considers it profitable," said Makarkin.
Japan makes up for failure on Russian energy market
Russia's decision to release two Japanese fishermen from the Kisshin-Maru 31 schooner, detained for alleged poaching on August 16, came as a surprise. Japanese fishermen had staged a defiant provocation just a few days before the expected release: on August 27, 39 trawlers illegally entered Russian territorial waters near the South Kuril Islands. An expert told the paper that the maritime conflict was caused by Japan's failure on Russian mainland. A government official, however, denied this suggestion.
"Since the time [former Russian President Boris] Yeltsin and [ex Japanese Prime Minister Ryutaro] Hashimoto went to a Siberian sauna together, there has been a rule: Japan and Russia should not parade their territorial claims to each other," said Alexander Sobyanin, head of strategic planning with the Association of Border Cooperation. "They were to discuss the problem through diplomats, refraining from any demarches. In order not to escalate the situation, Russia sometimes even overlooked illegal seafood exports. And now this rule has been broken."
A year ago, several Japanese financial-industrial groups attempted to enter the Russian market. Car-making projects started off successfully, but Japan was much more eager to invest in oil, gas and coal production. "These projects, however, have been stalled by Russia," Sobyanin said. "There are no official obstacles, but unofficially, projects in Yakutia, Buryatia and other East Siberian and Far Eastern regions have been put on hold. After all, there are enough eager investors without Japan, and we still have not signed a peace treaty [to end World War II] with it."
The provocation seeks to put pressure on the Russian Foreign Ministry, "to threaten a deterioration in relations and force the Russian government to make the Economic Development Ministry and the Natural Resources Ministry to be more loyal to potential energy projects," he said.
However, Vladimir Izmailov, Russian Deputy Agriculture Minister responsible for the fishing industry, said it was not the case. "Economically, Japan is not interested in a confrontation with Russia in the fishing industry, because we give Japanese fishermen significant preferences for fishing in the Russian economic zone, so they will not start a serious conflict," he said.