Sibirsky Aluminum (Sibal) has apparently succeeded in what seems to be a hostile takeover of one of Russia’s largest automobile producers. Sibal’s acquisition of a blocking stake in the Gorkovsky Avtomobilnyi Zavod (GAZ) auto factory, based in Nizhny Novgorod, raises new questions about the consolidation of Russia’s business empires. It also puts Sibal on a collision course with the EBRD, and could frustrate the London bank’s ongoing attempts to recoup its losses from the August 1998 financial crisis.
Sibal is part of the Russky Aliuminyi group, which is reportedly controlled by oligarchs Oleg Deripaska and Roman Abramovich. Russky Aliuminyi controls Russia’s largest smelters, and is one of the world’s largest producers of aluminum. Sibal’s attempts to acquire GAZ shares were clouded in secrecy, and exploited the confusion and low level of transparency that characterize the Russian business environment. After denying any designs on GAZ, in mid-November Sibal announced that it had acquired at least a 25-percent-plus-one stake in GAZ by purchasing shares held by large shareholders.
Sibal claims that it does not intend to take control of GAZ through the acquisition of additional shares at this time. But it purchased Nizhny Novgorod bus maker PAZ early in the year, and is also rumored to be acquiring shares of the third key automotive manufacturer in the region, engine maker ZMZ. If Sibal gains control of these three companies, they would then be transferred to a Sibal-owned subsidiary, RusPromAvto, to form the basis of a holding company. These moves suggest that Sibal is seeking to establish a strong position for itself in the automotive sector. In addition to diversifying its activities, these purchases could lock in captive automotive buyers for Sibal’s aluminum. Although no independent confirmation of the size of the Sibal stake is available, GAZ management has met with Sibal representatives to assess the group’s intentions for GAZ. GAZ management is expected to retain control of the company since Avtobank, the remaining large shareholder, is closely tied to GAZ and is headed by out-going GAZ chairman Nikolai Pugin. However, Sibal’s plans could block GAZ’s debt-for-equity swap currently being negotiated with the EBRD. This swap has been painstakingly developed as compensation for an EBRD loan to GAZ, on which the automaker defaulted after the August 1998 crisis. If consummated, this swap would make the EBRD the largest GAZ shareholder with a 30-40 percent equity stake. The EBRD is not surprisingly resisting Sibal overtures to purchase the loan (at a cut-rate price).
A meeting of the GAZ board of directors in late January may provide some concrete details about GAZ’s future. For now, Viktor Belyaev, chief executive officer of Sibal, has replaced Pugin as General Director of GAZ. Belyaev has experience in the automotive industry from a previous position at the KamAZ truck producer in Tatarstan. Four other Sibal executives were appointed to senior GAZ positions in finance, public relations, distribution, and supply. Since none of the old managers were replaced, it appears that Sibal wishes to facilitate a smooth transition and foster cooperative relations.
Sibal’s acquisition of GAZ raises a number of interesting questions about the future of Russian business. For one thing, it shows that the captains of Russian industry continue to find new and ingenious ways of preventing foreign investors like the EBRD from taking control of key industrial firms. It also suggests that the vast wealth generated in Russia’s monopolistic nonferrous metallurgical sector is forming the basis for new corporate empires which–in contrast to the financial industrial groups of the 1990s–are not based on financial institutions. It remains to be seen however, whether Sibal will be able to–or is even interested in–restructuring GAZ to make it a more competitive automaker (Russian and international agencies, January 10-19).
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