New SIBUR investor mulls IPO

As Leonid Mikhelson builds his stake in the Russian petrochemical major, the noncore disposal program accelerates

Russian petrochemical major SIBUR is accelerating its program of noncore disposals as it prepares for an eventual initial public offering (IPO) under the ownership of Russian entrepreneur Leonid Mikhelson.

With the new owner of a 25% stake in SIBUR in place since December 2010, moves to sell or joint venture the company’s fertilizer and tire operations are moving more rapidly, according to SIBUR president Dmitry Konov.

Mikhelson bought the 25% stake in SIBUR from Russia’s Gazprombank and has an option — awaiting regulatory approval — to boost this to 50%.

Longer term, he plans to buy 100% of the company.

«Having a financial institution as a shareholder compared with a private individual is certainly different. Having Mr. Mikhelson as a shareholder should accelerate the disposal of our noncore assets," Konov said.

«Mr. Mikhelson plans to support management to continue exiting the two major noncore areas of SIBUR — fertilizers and tires. We are in discussions with another Russian tire producer, Nizhnekamskshina," he added.

In November, SIBUR signed a memorandum of understanding with Italian company Pirelli and Russian technology group Rostechnologii to conclude a series of deals on joint activities in the tire industry and steel-cord production. «We have accelerated talks with potential investors. We believe we could become small shareholders in a larger Russian fertilizer company as there is plenty of scope for consolidation in this market. We could also sell part of the business," Konov said of the fertilizer market.

A new holding company — Miracle — has been created to hold the SIBUR investment for Leonid Mikhelson. He has ap pointed investment banker Pavel Malyi as president of this group and to represent him in the management of SIBUR.

Malyi told ICIS that Mikhelson’s ultimate aim would be to take SIBUR public.

«Mr. Mikhelson has said that a company of SIBUR’s stature should be public. It’s clearly a goal that he would encourage," Malyi said.

After the Federal Anti-Monopoly Service has approved increasing the stake from 25% to 50%, Mikhelson plans a full takeover.

«Mr. Mikhelson is now analyzing the opportunity. It shouldn’t be too protracted. This could take several months because SIBUR is viewed as a ‘strategic’ enterprise by the government, requiring an extra layer of regulatory approvals," Malyi said.

Mikhelson also owns Russian gas producer NOVATEK. Although there would seem to be synergies between the two companies, because SIBUR is a major consumer of gas as a feedstock there are no plans to integrate the two.
NOVATEK will remain a major gas retailer, leaving SIBUR to convert gas into petrochemicals. «We don’t think we’ll require any LPG [liquefied petroleum gas] from NOVATEK for the foreseeable future. I don’t see any real operational synergies between NOVATEK and SIBUR," Konov said.

Malyi on Miracle and NOVATEK: «Mr. Mikhelson is very much involved in the management of NOVATEK — this is his day job.»

«We have created a small shareholder team to have someone representing Mr. Mikhelson in SIBUR without him being actually involved in the company’s management.»

«He invested in SIBUR because he very much likes the existing management team. He supports the company’s existing strategy.»

«I ran investment banking for [Swiss group] UBS in Russia prior to this job, and this indicates that Mr. Mikhelson’s interest is financial in nature and not managerial. He is not planning to integrate SIBUR with his other assets or in becoming day-to-day manager of SIBUR.»

«He believes Russia presents a very interesting combination of factors such as excellent access to feedstocks, growing markets and undersupply of domestic petrochemical supply.»

«He thinks SIBUR is the best run company in the sector. Miracle is just a holding company. In reality, we are representing Mr. Mikhelson in managing SIBUR as a financial investment.»