OREANDA-NEWS. July 15, 2014. At a session chaired by Dmitry Medvedev, the Government Commission for Control over Foreign Investments approved transactions for acquiring “Binnopharm” CJSC and “Alium” Ltd. by a German company “Fresenius”; “Velmash-Service” Ltd. – by “Palfinger” of Austria; and “Astrakhan Oil&Gas Company” OJSC – by “EuroChem”.

The Federal Antimonopoly Service (FAS Russia) is the body authorized to control foreign investments in the Russian Federation and it provides informational-and-analytical support for the work of the Government Commission.

The shorthand report of the briefing of the Head of the Federal Antimonopoly Service, Igor Artemiev, upon the outcome of the meeting of the Government Commission:

Igor Artemiev: The Commission’s meeting was chaired by Prime-Minister (Chairman of the Government) of the Russian Federation Dmitry Medvedev. Today there have been many questions and discussions, and I would like to tell you about some of them.

First, during this summer we will complete preparing amendments to the 57th Law, on which the Government Commission is working, for the second reading at the State Duma. The draft Law already adopted in the first reading by the State Duma has many novelties. Certainly, the second reading will put forward a number of new amendments, which we finish considering in the Government approximately by August.

Today there have been many discussions related to legislative activity. In particular, I would like to remind that the draft Law contains mandatory requirements on submitting information about end beneficiaries, basically disclosing offshore companies, etc. It extrapolates No.57 Law to the transactions with property of strategic companies. Today, as you know, control of the Government Commission is extended to transactions with shares. This also entails property which makes a company strategic.

Also based on practical experience, particularly judicial practice, relevant amendments will probably be introduced – the norm that if in total a share of two foreign shareholders is more than the total share of Russian shareholders, such enterprise shall be considered under control of a foreign investor. For instance, such a complex situation emerged in a well-known dispute with “Vympelcom”.

Several transactions have been adopted and supported that concern entry of pure foreign investors to the market, large, interesting investors that acquire our strategic companies. I’d like to draw your attention to two such transactions.

A large German pharmaceutical company – “Fresenius”, it can be said that this is a globally renowned company, acquires “Binnopharm” and “Alium” (which produce many pharmaceutical drugs and substances developed and produced in Russia) from “Sistema” JSFC and several other Russian shareholders (you know that Vladimir P. Evtushenko is the main beneficiary of “Sistema” JSFC). In particular, the Russian company produces such drugs as “Combivir” to treat HIV infection or, say, “Salbutamol” from bronchial asthma, or “Eritropoetin” from anemia and several other drugs. It is a large transaction.

As a result of interrelated transactions with shares, German “Fresenius” will ultimately obtain 100% capital of our strategic company. It is a good example of investments by large foreign capital in Russian pharmaceutical industry, in this case – European capital.

Another transaction is with a large European company – “Palfinger” of Austria, which produces hydraulic loading-unloading equipment. It is one of the market headers. “Palfinger” is acquiring “Velmash”, a Russian strategic company, which is based in Velikie Luki and is also involved in production of lifting and transporting equipment, hydraulic systems and various modern manipulators for carrying and transporting. The equipment can be used in diverse fields. In this case the Government Commission also supported the transaction. It is a machine-building complex that shows that large, in this case, Austrian investors buy Russian companies. They will come with new technologies; they will come with large investments, which certainly is a positive factor for the Pskov region, Velikie Luki, and for the Russian Federation in general.

This is what I primarily wanted to tell you.

Question: What are the transactions in the oil and gas industry?

Igor Artemiev: We approved a transaction for acquiring “Astrakhan Oil & Gas Company” OJSC by “EuroChem”. This is a transaction where overall there are foreign investors but they have minority stakes, because the main beneficiary is a well-known Russian businessmen Andrey Melnichenko.

Since the transaction took place through offshore companies, through trusts that still have foreign investors who in general can control a particular company, it was also considered by the Commission and was supported.

Question: What is the share acquired by “Palfinger” in “Velmash”?

Igor Artemiev: Ultimately “Palfinger” will control 60%. They also engaged another large German company –the Staindl family. And this is how the company is called “Staindl”. They will get 20%. Also “PMHJ Holding Global Ltd.” will have 20%. Effectively, it will be a fully foreign company.

Question: Can you clarify if the Commission also considered a transaction with participation of an American company “Abbott” that wants to acquire “Veropharm”?

Igor Artemiev: Yes, the Commission also considered it. While the discussion was quite positive, it was decided to return to the transaction at the next meeting of the Commission. In other words, the transaction is postponed. This is because “Abbott” has filed an official petition and the full package of documents just recently.

The transaction has been under discussion for long but as you know there was a unique incident when “Abbott?” wanted to acquire a Russian company “Petrovax” that produced vaccines and at that time the Government Commission refused to grant permission since vaccines is a national production practically in all countries. And it is perfectly possible to understand “Abbott”, which until some confidence formed that the transaction would not be refused did not want to file the official petition. They probably dragged it out a little bit due to their concern, which admittedly, is quite understandable. Therefore, when the documents were filed, we tried but were not able to form a complete package of documents that was required, which raised some questions from the Government Commission.

I repeat, with the overall positive discussion of the case, the Government Commission has not been able to make a positive decision and now we have to put the finishing touches, give another brush to the transaction, to the documents together, in a friendly dialogue with “Abbott”. I think that in a further submission the transaction has good chances for success.
Question: When will it happen?

Igor Artemiev: You know that the Commission for foreign investments in the strategic fields is called for meetings by the Chairman of the Government, Dmitry Medvedev. Typically he does it quarterly. Most likely, we will return to the transaction in autumn. But we will be able to refine everything, weigh everything and once again talk to all branches. I hope that the transaction has very positive prospects.