OREANDA-NEWS. December 12, 2012. Russian Technologies Corporation will decrease its share in the capital of VSMPO-AVISMA to blocking shares. Management participation in the capital of VSMPO-AVISMA Corporation will increase to 50% + 1 share. The deal amounts to USD 965-970 mil.

Russian Technologies Corporation sells 45.42% shares of the largest titanium manufacturer to VSMPO-AVISMA Management. Previously management team purchased 4.6% shares of the company in the open market. These two blocks of shares will be transferred to a JV created for this deal, in which 75% plus 1 share will be owned by management and 25% minus 1 share – by Gazprombank. Thus, JV will control 50%+1 share of VSMPO-AVISMA, blocking shares (25%+1 share) will be kept by Russian Technologies. Outstanding 25% minus 2 shares will circulate in the market as before.

The shareholders will pay USD 187 per VSMPO-AVISMA share. The weighted average cost of VSMPO-AVISMA share at MICEX-RTS stock exchange for the last 3 months is USD 161.

Current managers of VSMPO-AVISMA succeeded to considerably increase titanium output. In 2012 the peak output was surpassed by 10%. We expect production volume to increase 10-15% yearly until 2015, – said Sergey Chemezov, Russian Technologies CEO. Since the introduction of new management team led by Russian Technologies, VSMPO-AVISMA signed strategic contracts for supply of titanium with Boeing, Airbus, Embraer, Rolls-Roys. Now the facility is financially stable, secured with orders, e.g. there is an agreement with Boeing for high-tech products supply up to 2018, that provides excellent growth prospects. In our view this is a good time to cede control to the management team that purchases the stock with a considerable mark-up to market price.

“As major shareholders of the company we will continue to increase our participation in the world titanium market both through increase of volumes supplied to the largest aerospace companies, and expansion to developing markets, such as medical, motor and oil & gas. Now the company controls around 30% of titanium market. Also, we signed first LTA’s with the Russian companies, and for the first time over recent years the share of orders from the Russian companies increased by 5% and reached 35%, - said Mikhail Voevodin, VSMPO-AVISMA CEO. Purchasing of mining companies in Ukraine will give us a permanent source of raw materials – as of today we cover 30-40% of our raw materials requirements. We plan further large investments in this field in the future.”

The team built by Sergey Chemezov came to VSMPO-AVISMA Corporation in 2006, with acquisition of 70.42% shares. Russian Technologies took control over the company in hard times – due to a conflict among shareholders the production was on the verge of stop. In 2007 an investment program amounting to USD 1 billion was established. Even during the recession in 2008 the investments were not ceased – each year the investments amounted to USD 200 million. This allowed VSMPO-AVISMA to permanently accelerate production. Whereas in 2007 the company produced 27 thousand ton of titanium, in 2015 this index is forecasted to reach 40 thousand ton, which corresponds to 46 thousand ton in 2007 product mix. The basic index of company performance, net profit increased from RUB 173 million in 2009 to RUB 7.1 billion in 2012, i.e. more than 40 times.