Americans Saw Ilim Pulp in Half
// pulp paper foreign investment strategic
A second large natural resources holding is being established in Russia and foreigners have been given permission to own half of it. Now that TNK-BP has sold 50 percent of its assets to Western investors, Ilim Pulp is following suit. That deal cost the American International Paper Co. $750 million. It was only able to buy 50 percent of Ilim's stock because of considerations of national security. International Paper is one of the world's leading producers of paper and cellulose products.
Key Ilim Pulp assets were recently transferred to the Swiss Ilim Holding S.A. The corporation's chairman, Zakhar Smushkin, told Kommersant that the decision to attract a strategic investor was made in 2004. International Paper was chosen through a closed tender, in which the Italian Mondi also participated. Although the American company assessed Ilim Pulp at $1.3 billion, it paid $750 million, all in cash, for a 50-percent share. The money will be distributed among the current shareholders of the Russian company, all of whose shares will be reduced by half. Although the owners of Ilim Pulp are not officially known, Mikhail and Boris Zingarevich are mentioned among them, along with Smushkin.
According to information obtained by Kommersant, the owners of Ilim Pulp wanted to leave the business altogether, but only received permission from the Kremlin to sell half of the company to foreigners. The recently-created OAO Ilim Group will manage the company. The Russian owners will have four seats on the board of directors of the group, as will International Paper. The American company will appoint the chief operating officer for the group, who will handle the actual running of Ilim Pulp, and the Russians will appoint the chief executive officer, the nominal head of the group.
A 1.2-billion investment program is also part of the deal. International Paper general director John Faraci told Kommersant that the money would be used for renovations and production development. No new acquisitions are being planned.
Ilim's lumber processing assets are not part of this deal. They are being retained by the Russian owners to become the foundation for holding to produce building materials. Smushkin did not rule out the possibility that the money the Russians receive from the deal with International Paper would be used for that purpose. He noted that the new holding was being formed as part of the national project for accessible housing. The current Ilim Pulp shareholders just completed a deal to buy 25 percent of the company's assets from Vneshekonombank, thus putting an end to a conflict with businessman Oleg Deripaska over those stocks that began in 2000. Industry insiders are complementing the Russian owners of Ilim Pulp on the well-formulated deal.
Dmitry Butrin, Sergey Ryzhkin
All the Article in Russian as of Oct. 26, 2006
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Photo: Dmitry Lebedev
