Uralkali and Silvinit announced Dec. 20 that the two companies will merge, creating the world’s second largest potash producer. The new Russian firm will be worth US$24 billion.
The news has been anticipated, as earlier this year Russian billionaire Suleiman Kerimov and investors took controlling interests in the two Russian companies.
The plan is for Uralkali to buy 20 percent of Silvinit with a $1.4 billion cash payment. The rest of the company will be acquired though new share offerings.
Silvinit shareholders will get 133.4 Uralkali shares for each ordinary Silvinit share held, and 51.8 Uralkali shares for each preferred Silvinit share.
Production of potash by Uralkali is reported at 2.2 million mt for 2010, with new capacity to push output to 5.5 million mt by 2012. Silvinit output is currently at 5.1 million mt, with new production facilities under consideration.
Both companies have called extraordinary general shareholder meetings on Feb. 4, 2011, to consider the merger. If the shareholders agree, the merger should be completed by May 2011.
Minority shareholders in Silvinit are not pleased with the arrangement and are demanding a revision of the merger plan. Until the details are changed, they said, Silvinit shareholders should vote against the merger.
The dissident group noted that Silvinit shares dropped 13 percent after details of the merger emerged. They add that the deal is stacked in favor of Uralkali.
As the year closed out, the Russian Antimonopoly Service is expected to approve the merger. Federal Antimonopoly Service chief Igor Artemyev told local media that the FAS is looking favorably on the merger. “We are working with both companies and the group of owners for a long time. Our attitude to the deal is positive,” he said.
The FAS is also expected to address fears that the merger of the two giant companies could cause a run-up in potash prices in Russia. In a newspaper interview, Artemyev said the watchdog might issue a resolution limiting the growth of potash prices. He did not rule out the possibility that the price could be fixed for a set number of years.