VEB decided to sell 3% of UC Rusal amid a record rise in aluminum prices

VEB will sell 3.15% of UC Rusal, such a stake on the stock exchange costs $515 million

VEB plans to sell 3.15% of UC Rusal on the back of a record rise in aluminum prices. The state corporation acquired this stake during the IPO of an aluminum company in 2010 and is now going to sell it on the stock exchange

VEB.RF is “seriously considering the possibility of selling its stake in UC Rusal against the backdrop of “historical highs” in aluminum prices. This was stated to RBC by the Executive Director of VEB Ekaterina Serebryannikova.

VEB I bought 3.15% of UC Rusal during its IPO on the Hong Kong stock exchange in early 2010 for $660 million (this corresponded to 19.8 billion rubles at the Central Bank rate at the time of purchase). According to a source close to the top management of the state corporation, since then its share in the company has not changed. Now such a package is worth $515 million on the stock exchange (38.5 billion rubles at the current exchange rate).

The cost of a tonne of aluminum has increased by 18% since the beginning of 2022 and exceeded the mark of $3.2 thousand – the maximum level since July 2008. On Friday, February 11, aluminum futures on the London Metal Exchange traded at $3,224 per ton. Reasons for rising prices for aluminum experts see in the rise in electricity prices, which forced European aluminum producers to reduce production, and low levels of stocks of this metal. According to Goldman Sachs, average aluminum prices could reach $3,450 per ton this year, $3,850 in 2023, and $5,000 in 2025.

“Given the situation on the market, the price of aluminum is reaching historical highs. We are seriously considering the possibility of implementing our package in accordance with the approved corporate procedures within the framework of the current legislation and in the interests of the development of UC Rusal, ”said Serebryannikova (her words were reported by the press service of the state corporation).

If the transaction is implemented, VEB will also consult with the Moscow Exchange (shares of the aluminum company received a listing at this site in 2015). “Such a deal should not negatively affect the value of the company’s shares,” adds VEB’s executive director. The representative of UC Rusal declined to comment, RBC sent a request to the press service of the Moscow Exchange.

Dmitry Smolin, an analyst at the Sinara investment bank, believes that VEB will use the accelerated procedure for collecting applications (ABB) to sell its stake on the stock exchange: it is done in one day, usually the stake is sold at a discount of 3-5%. Usually, the shares of the company whose stake is sold under the ABB procedure go down, but this effect is short-term.

Given the 5% discount, VEB.RF will be able to sell its stake for $490 million, or 36.7 billion rubles, Smolin says. In this case, the dollar yield of the transaction will be minus 26% for the state corporation, and plus 85% in rubles.

According to the UC Rusal website, the company’s largest shareholder is En+, founded by Oleg Deripaska (56.88%) and Sual Partners by Viktor Vekselberg and Leonard Blavatnik (25.52%). RBC sent requests to the representative of En +, Deripaska and Sual. In general, this deal is a plus for UC Rusal: a higher share of shares in free float will help increase its investment attractiveness, Smolin noted.

According to him, the sale of 3.15% of UC Rusal will be an opportunity for large investment funds to purchase the company’s shares without driving up their price. The metallurgical sector is attractive, and the Russian aluminum company has the lowest cost among global metal producers. This is a good bet on further growth in aluminum prices, the analyst concluded.

UC Rusal shares from the beginning of 2022 grew up by 13% to 83.2 rubles. for paper. Six analysts polled by Refinitiv predict that over the next 12 months, the company’s paper could rise by another 9%, to 91.03 rubles. for paper. BCS analysts predict growth by 34% (up to 112 rubles), and Sinara investment bank – by 39% (up to 116 rubles).