Silvinit gives merger sign with trader stake sale

Trade the News

Wednesday September 08, 2010 06:33:13 PM GMT

* Silvinit does not disclose IPC stake buyer, price

* Uralkali controls Silvinit sales -analyst

MOSCOW, Sept 7 (Reuters) - Silvinit, Russia's largest potash producer, has sold its 32 percent stake in trading firm International Potash Co (IPC), data on its website shows, in another sign it is headed for a merger with rival Uralkali.

An updated list of Silvinit affiliates published on its website showed that it had sold the stake. The company declined to comment on the matter and did not name the buyer.

There is speculation that Kremlin-friendly tycoon Suleiman Kerimov is aiming to merge Silvinit and Uralkali, Russia's No. 2 potash miner Uralkali, which he controls, to create a rival to global leader Canada's Potash Corp.

In June, Kerimov acquired 25 percent of Silvinit and two offshore firms controlled by investors friendly with Kerimov acquired a further 44 percent of the company in August.

Silvinit then named former Uralkali head, Vladislav Baumgertner, as its interim CEO.

Belaruskali, the largest producer in the former Soviet Union, has also been in the frame for the merger, though analysts have said shaky relations between Russia and Belarus make that unlikely for now.

Uralkali and Belaruskali sell their output via joint venture Belarussian Potash Co (BPC). If Silvinit formally joined the group, BPC would control about 45 percent of the global export market according to previous analysts' estimates.

Since Kerimov's purchase of a stake in Silvinit, Uralkali effectively controls Silvinit's sales, though it is unclear whether Silvinit will continue to use IPC or switch to BPC, Troika analyst Mikhail Stiskin said.

"This has yet to be determined and this would be conditional on the position of anti-trust regulators, particularly in the USA, given that BPC could obtain a 45 percent market share in global trading," Stiskin wrote in an email.

Analysts at Moscow-based investment bank Renaissance Capital last month estimated that a combined Silvinit/Uralkali group will have 11.5 million tonnes of capacity next year and 13 million tonnes in 2012.

Potash Corp already has 12 million tonnes of capacity and plans to add a further 7.1 million tonnes by 2014.

BHP Billiton, which has made a $39 billion hostile bid for Potash Corp, is also planning to develop a giant new mine. (Reporting by Natalia Shurmina and Alfred Kueppers; editing by Karen Foster)

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