“Rostechnologii” described takeover MAZ

A merge of MAZ and KAMAZ assets lasted for over one and a half years and is nearing completion. Despite numerous attempts of Belarus to preserve control over MAZ in the holding, it is likely to lose the control for the amount, which is being determined at the moment.

On August 30^th, General Director of KAMAZ Sergey Kogogin outlined the main stages in the future acquisitions of MAZ in an interview with Kommersant.

The following stages of merger within the “Rosbelavto” holding were announced. MAZ gives the holding 75% -1 of its shares, leaving a blocking stake. KAMAZ gives 49.9% of its shares to the holding. Originally the holding was anticipated to be created on equal terms, but at a later stage “Rostekhnologii” could buy out the remaining 25% of the shares.

MAZ virtually has no other options. 81.5% of exports in 2012 were to the Russian market. Despite a slight fall in prices, shipments increased by more than 40%. MAZ cannot replace this market and if it refused to cooperate, the result could be tacit opposition from the Russian government.

Trying to maintain control over MAZ, the Belarusian government re-evaluated MAZ, increasing its value from USD 800 million to USD 1100 million.

At the same time, they assessed KAMAZ at USD 1600 million. Later a reassessment of KAMAZ was carried out and its value was arbitrarily increased to USD 2600 million. The restoration of the relative values of MAZ and KAMAZ was needed in order for Russia to achieve the desired proportion of shares in the created holding.

The declared opportunity to buy 25% of the stake in the future holding by “Rostekhnologii” company is the cornerstone of all negotiations. In the future the sale of the MAZ blocking shares could not be excluded. Given the government’s commitment to sell state assets worth USD 2.5 billion in 2012 and that there are no other major asset sales projects, this deal becomes almost inevitable for Belarus to receive the next tranche from the EurAsEC Anti-Crisis Fund.

Due to Russia’s WTO accession and the increased competition in the Russian market, the need to maintain export levels forced MAZ to closer cooperation with KAMAZ. An additional factor, encouraging the country’s leaders to conclude this agreement is the country’s need for foreign currency in the view of substantial external debt repayments. Also one should not forget there is still an option that Belarusian authorities reject the deal completely. However the possible negative effects from such decision will be demonstrated shortly, with consequent degradation of the assets’ value.