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TheStreet Open House

The Deal: Prokhorov Buys Uralkali Stake from Billionaire Comrade Kerimov

Stocks in this article: PLZLY

NEW YORK (TheStreet) -- Suleiman Kerimov has agreed to sell his 21.75% stake in Russian potash producer  Uralkali to fellow Russian-born billionaire  Mikhail Prokhorov, raising hopes of an end to a political dispute between Russia and Belarus that has roiled prices for the fertilizer ingredient.

Prokhorov's Onexim Group announced the deal on Monday, Nov. 18, without disclosing a price for the transaction. It noted that it expects to the deal to "close shortly" and that it does not require any regulatory approval.

"The purchase of the stake in Uralkali is a long-term investment in a company that is unique from the standpoint of its position in its industry and its role in the world economy," Onexim CEO Dmitry Razumov said in a statement. "We are certain that the potash industry has strong fundamentals and that Uralkali, as the world's leading producer and the key player in the industry, has considerable potential for growth in value."

Uralkali has been at the centre of a dispute between Russia and its neighbor Belarus since July, when the potash producer said it plans to pull out of Belarus Potash Co., a joint venture with the state backed JSC Belaruskali.

Uralkali gave notice of its plans on July 30 and warned that is decision to leave the JV, which controlled about 40% of the international potash trade, could send prices for potash to less than $300 a metric ton, down from about $400. Belarus authorities responded in late August by arresting Uralkali CEO Vladislav Baumgertner and issued warrants for four other executives, claiming that they had abused their power. Baumgertner remains under house arrest in Minsk.

The arrest, coupled with pressure from the Russian government to end the dispute with Belarus, seems to have convinced Kerimov to seek a buyer for his stake. The Belarusian government had said that any reconciliation with Uralkali would have to involve a change of company ownership.

A report by a Russian lawyer in September claimed that Kerimov was seeking about $3.7 billion for the holding, valuing the company at about $17 billion.

Prokhorov is a co-owner of the Brooklyn Nets basketball team and one of Russia's wealthiest individuals. Earlier this year he sold a 40% stake in Polyus Gold International (PLZLY) for $3.62 billion to people linked with Kerimov.

The sale of Kerimov's 21.75% stake is expected to precede the disposal of a further 11.25% stake in Uralkali that is held by Kerimov's associates, Filaret Galchev and Anatoly Skurov.

Uralkali is listed on the Moscow exchange. It had a market capitalization of 503 billion rubles ($15.5 billion), based on its Monday share price of R179.83, which was up R4.55, or 2.6%, on its Friday close. --By Paul Whitfield in Paris.

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