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    Company Watch: Rosoboronexport controls AvtoVAZ

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    MOSCOW, November 24 (RIA Novosti, compiled by Peter Lavelle) A Russian business daily reported Thursday that Russia's largest automotive producer, AvtoVAZ, is under the control of Rosoboronexport, the state-owned arms export agency. Minority shares holders in the company have concerns related to future capital investments and management changes.

    Vedomosti reports quoted Konstantin Titov, governor of Samara, where Avtovaz is located, as saying that 51% of the carmaker's shares are now in the possession of Rosoboronexport, which apparently paid $700 million for the controlling stake.

    However, the story continues to quote a company source as saying a controlling majority is held by AvtoVAZ itself through associated companies.

    Titov said that he believed Rosoboronexport was effectively the controlling shareholder in AvtoVAZ though this is still to be legally formalized. The newspaper cites another insider as saying the arms export agency will shortly buy the shares in AvtoVAZ held by the company with finance provided by Vneshtorgbank - Russia's largest and state-owned commercial bank, which is also a shareholder. Both companies declined to comment.

    The investment community, particularly minority shareholders, has expressed concerns over why the state's arms export agency wants control of the automaker. As Rosoboronexport's core business is arms exports, questions from investors range from future capital investments to management changes.

    AvtoVAZ retains a 40% market share in its home market, and last year the company turned a profit of $147 million on revenues of $5.57 billion and produces 700,000 Lada cars a year - some 70% of all Russian car production.

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