Onexim mulling stake in Russian potash giant Uralkali

Russian billionaire Mikhail Prokhorov's investment group Onexim has joined a list of potential bidders for a stake in the world's largest potash producer, Uralkali, as the search continues for a peacemaker to end a row between Russian and Belarusian potash exporters that has disrupted the global market in the valuable fertilizer component.

Mikhail Prokhorov's investment group latest in long line of bidders for firm feuding with Belarusian partners

A dispute between Russia and Belarus, two of the world's major potash exporters, has caused turbulence in the global market. It is hoped that a change in ownership at Russia's Uralkali, whose CEO has been imprisoned by Belarussian authorities, will stabilize relations between the two countries. Uralkali, one of whose potash mines is shown above, is the world's biggest potash producer and until recently was part of a sales cartel with state-owned Belaruskali that controlled two-fifths of the world market. (Sergei Karpukhin/Reuters)

Russian billionaire Mikhail Prokhorov's investment group Onexim has joined a list of potential bidders for a stake in the world's largest potash producer, Uralkali, as the search continues for a peacemaker to end a row between Russian and Belarusian potash exporters that has disrupted the global market in the valuable fertilizer component.

The Bloomberg news agency reported on Wednesday that tycoon-turned-politician Prokhorov was considering buying the Uralkali stake owned by his former business partner Suleiman Kerimov.

Kerimov, Uralkali's biggest shareholder, has come under pressure to find a new owner for Uralkali after the company in July quit a sales cartel with state-owned Belaruskali that had controlled two-fifths of the world market and after its CEO, Vladislav Baumgertner, was arrested by Belarusian authorities last month.

The dissolution of the joint venture, known as the Belarusian Potash Company (BPC), threatens to push potash prices down 25 per cent, a massive blow to the fragile economy of Belarus, which relies on exports of potash, a major fertilizer ingredient, for 12 per cent of state revenue.

Uralkali CEO under house arrest

Baumgertner was arrested last month by Belarusian authorities who accuse him of abusing his powers. He potentially faces 10 years in jail on charges that he and others at BPC gave discounts on product to some buyers without telling the Belarusians, redirected ships to take Uralkali product instead of Belaruskali's and cancelled some BPC contracts, promising partners a Uralkali alternative at lower prices.

Baumgertner spent a month in a Soviet-era prison in the Belarusian capital, Minsk, before being released Thursday.

His lawyer, Dmitry Goryachko, said his client was released and taken to a rented apartment in Minsk under the surveillance of the KGB intelligence agency.

Russian tycoon Mikhail Prokhorov is rumoured to be considering purchasing a stake in Uralkali through his investment firm Onexim. (Alexander Zemlianichenko/Associated Press)

Uralkali has denied any wrongdoing and has said previously that Baumgertner did not have the powers the Belarus authorities say he abused but  his arrest has increased the pressure for a change of ownership that could bring about a reconciliation.

A search is underway for a buyer who would be acceptable to the Kremlin and who could "pour oil on troubled waters," one financial source familiar with the situation said.

The source stressed, however, that Kerimov, who owns a 21.75 per cent stake in Uralkali through his foundation and together with his partners, Filaret Galtchev and Anatoly Skurov, controls 33 per cent of the company, is not under pressure to sell.

Prokhorov, a metals and banking tycoon who owns the Brooklyn Nets pro basketball team, ran against Vladimir Putin in last year's presidential vote but is widely seen as a card-carrying member of Russia's establishment.

Onexim declined to comment, as did Kerimov's investment company, Nafta.

Three sources familiar with the matter told Reuters that nothing had been decided so far, with one adding: "Everybody is going around in circles."

Two of the sources said Kerimov and his partners wanted a premium for the asset while the potential buyers were seeking a guarantee that good relations with Belarus would be restored.

"It's an attempt to organize a beauty contest," one source said.

Chinese wealth fund bought 12.5% stake

Chinese sovereign wealth fund China Investment Corp. acquired a 12.5 per cent stake in Uralkali, via a bond exchange deal on Tuesday. The deal was triggered when Uralkali's market value fell below $20 billion, a level that could serve as a benchmark for future deals.

Analysts say the Chinese deal, on behalf of a country that is the world's top potash importer, might complicate attempts to revive the Russia-Belarus potash cartel

Prokhorov joins a roll-call of candidates that have been linked in press reports to Uralkali, including Norilsk Nickel, the Arctic miner run by Vladimir Potanin — another former partner. Norilsk has denied any interest.

Also linked to the stake has been Vladimir Evtushenkov, majority owner of telecoms-to-oil conglomerate Sistema.

Evtushenkov has also denied his interest and, in an interview on Wednesday, CEO Mikhail Shamolin told Reuters that Sistema was not considering any offers.

Political meetings ongoing

Political contacts between Moscow and Minsk have intensified this week, with Russian President Vladimir Putin meeting his Belarusian counterpart Alexander Lukashenko on the fringes of a regional summit on Monday.

Prime Minister Dmitry Medvedev told reporters on Wednesday he would discuss the matter with the  Belarusian prime minister Mikhail Myasnikovich.

It was Myasnikovich who invited Baumgertner to a meeting on Aug. 26 after which the Uralkali CEO was detained, triggering public protests by the company's chairman, former Kremlin chief of staff Alexander Voloshin.

"[We] will [discuss] everything, of course, definitely," Medvedev told reporters in Astana, the capital of Kazakhstan.

Uralkali shares were up 1.4 per cent in Moscow, outperforming a 0.8-per cent rise on the Moscow index.

With files from The Associated Press


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