Double price for AvtoVAZ

Renault-Nissan, “Rostehnologii”, “Troyka Dialog” and AvtoVAZ agreed on the transfer of control over the enterprise to the French-Japanese alliance, the companies declared yesterday. By the end of the year, “Rostehnologii” and Renault-Nissan will create a joint venture and assign to it their respective shares of AvtoVAZ (the companies currently own 29 and 25% of the capital, respectively). Next year, Renault will contribute to the JV with 300 million USD, and Nissan – with 450 million USD. “Rostehnologii” will prorogate the larger part of the interest-free credits (46 billion roubles), facilitated by the State, “for a prolonged period”, according to the communication made by the partners.

AvtoVAZ will recover the rest 7 billion roubles by sale of secondary assets. By the end of the next year, the joint venture of Renault-Nissan and “Rostehnologii” will purchase the entire share of AvtoVAZ owned by “Troyka Dialog” (20,5%). According to the partners, the joint venture will end up owner of 74,5% of AvtoVAZ, and Renault-Nissan – owner of the total of 67,13% of the joint venture, which gives control over 50% plus 1 share of the Togliatti automobile plant.

A source connected to one of the enterprise’s shareholders told “Vedomosti” that Renault and “Rostehnologii” will assign stocks of equal value to the joint venture. Therefore, they will initially own equal shares of the JV. Afterwards the company will issue additional 750 million USD worth of shares for Renault and Nissan. Then the alliance’s share of the JV will reach 67%, and the share of “Rostehnologii” will go down to 33%. All of the received funds will be used for the purchase of the share of “Troyka Dialog” and the rest of “Rostehnologii” stock. Oksana Nazarova, representative of Renault-Nissan, explains that approximately 600 million USD will be invested in the share of “Troyka Dialog”, and 150 million USD will be paid for the 4% stock owned by “Rostehnologii”. She reminds that the purchase of 25% of AvtoVAZ shares in 2008 cost the alliance 1 billion dollars.

A source connected to one of the enterprise’s shareholders informs that the premium for the stocks of “Rostehnologii” and “Troyka Dialog” will be “almost double”. However, the source believes it is adequate, since Renault-Nissan gains control over AvtoVAZ.

A source in the Renault-Nissan alliance says that “Rostehnologii” may prorogate the credits to AvtoVAZ for 20-30 years. This will be very convenient. The AvtoVAZ report for the IV quarter of 2011 states that the enterprise must repay to “Rostehnologii” 28 billion roubles in April of 2013 and another 25 billion – in June of 2019. A source connected to one of the enterprise’s shareholders informs that “Rostehnologii” will have the right to convert the debt into shares of AvtoVAZ.

The “Vedomosti”’s interlocutor contentedly says: “The transaction reflects the strategic intent of the parties”. Renault-Nissan, the strategic investor, gains control, “Rostehnologii”, the representative of the State, decreases its share to a blocking stock, “Troyka Dialog”, the financial investor, leaves the project. A source connected to a party to the agreement adds that “Rostehologii”’s strategy is to keep the blocking stock. The source insists that both parties need this, and a source in Renault-Nissan concurs. The latter says that the alliance does not intend to increase its share of AvtoVAZ by purchasing the state corporation’s share or by purchasing the shares in the market.

The creation of a joint venture by Renault-Nissan and “Rostehnologii”, according to a source connected to one of the enterprise’s shareholders, “consolidates the relationship” of the partners. An institute has been formd, which allows for a joint management of AvtoVAZ, nominating the Board and the General Director of the enterprise, etc. The “Vedomosti”’s interlocutor contentedly says: “This is a whole new level of integration”.

The interlocutor did not say whether the JV would make the minority shareholders an offer. He said that the answer to that question would be known after the signing of the binding agreement in December. Arthur Rokhlin, Partner at the Law Firm "YUST", and Ilya Rachkov, Partner at the Law Firm "Noerr", believe that it is unlikely that the companies will manage to avoid making the offer.

Vladimir Bespalov, an analyst of “VTB Kapital”, comments that the transaction opens excellent possibilities for AvtoVAZ itself. He notes that the enterprise will gain access to new technologies and expand the model range. AvtoVAZ controlled 23% of the Russian automobile market. V.Bespalov is convinced that in the near future the triple alliance will achieve domination.

Source of the publication is available here.