Transfer of privatization of “Bashneft” has puzzled investors


Market participants see the government’s decision to postpone “indefinitely” the privatization of “Bashneft” negative signal, but I hope that this step of the Russian authorities will not affect plans for the sale authorities of other state-owned companies, according to a survey among managers of investment funds and bankers.

Transfer of the transaction

The decision to postpone the transaction for the sale of the state stake in Bashneft showed the inconsistency of actions of Russian officials who, in the beginning launched large-scale privatization, and then virtually abandoned one of its major deals, said investment Director Prosperity Capital Management Alexander Branis. According to him, the authorities do not add clarity to investors, there’s no guarantee that a similar fate does not befall other state-owned companies, shares in which are planned to sell. According to the Governor, the postponement of privatization of “Bashneft” can affect the behavior of investors who plan to take part in the following transactions in the shares of companies with state participation. “Everyone understands that the government can turn 180 degrees and change plans,” said the Manager.

Some market participants are more pessimistic. “The government’s decision confirms my skeptical view on the prospects of privatization in Russia. An annual program of privatization has once again be only declarations on paper that upset,” says the asset Manager of Swiss private Bank UBP Paul Leberco.

That the postponement of the privatization of “Bashneft”, — a negative signal for investors, said Wednesday the head of Sberbank German Gref. “Obviously, this is not a positive signal for the market. I have not seen, to be honest, explanation. I think it’s very important to be very clearly was communicated the reasons for the decision, because if the decision was made, that, probably, there were some serious circumstances”, — quotes its words Agency “Interfax”.

However, experts acknowledge that the government’s decision to postpone the privatization of “Bashneft” was taken at an early stage, when there wasn’t even all conditions of the transaction. Besides, the real contenders for the purchase of the assets of the oil company was only two — Rosneft and LUKOIL. “In the deal, fortunately, was not involved foreign investors. The struggle was between two major Russian companies, so the market cancellation of the transaction will not affect, — said a top Manager of a large state Bank. The only victims in this story were the speculators who have bet that the company will put the offer to the minorities, and bought up shares of “Bashneft” on the market in the hope of earning”.

Sale of shares

Since the beginning of July, the news of the impending privatization, the paper “Bashneft” began to rise sharply in price, an increase for the month by 19%. At the peak of growth the company’s shares rose to 3178 RUB, however, already on Tuesday evening, August 16, when appeared in the media information about the cancellation of a transaction, securities of the oil company fell sharply from 3132 to 2788 RUB on Tuesday, the sources said that the government has abandoned plans to sell this year, 60% of the ordinary shares of Bashneft (50% of the capital). This information was confirmed by press Secretary of Prime Minister Dmitry Medvedev Natalia Timakova, noting that the privatization of “Bashneft” “was postponed to a later date”. On Wednesday, shares of oil companies continued to fall, declining in the first half of the day to 2720 RUB

“Because the deal yet, then cash in on the offer, no one expects. Speculators sell shares”, — commented the Manager of the Western investment Bank.

The message about the postponement of the privatization will have a negative impact on the value of shares of “Bashneft” because it deprives them of key catalyst of the upcoming privatization, according to analysts of the Russian investment company “Aton”. They predict that the cancellation of the deal at the last moment, for unknown reasons, is not the best way affect the Russian investment climate and reduce the attractiveness of Russian shares. “Although the government has not abandoned privatization, the shares of “Bashneft” will be traded without the catalyst of the upcoming sale, and the price is likely to be re-defined in a fundamental performance of the company”, — stated in the review of investment company.

Foreign pragmatism

Market participants do not exclude that the government can change the timing of privatization and other upcoming placement companies, but I don’t see that it can reduce appetite. The representative of the American investment Bank operating in Russia, said that in any country there are always risks of revision of the terms of the placement or its cancellation. “The owners of the company always feel that you should wait a bit and then it will be possible to sell the package more expensively” — he said. At the same time, Director for investments “TKB investment partners” Vladimir Chuprov does not believe that the government can roll privatization. “It means nothing, because while other than the sale of 10,9% of ALROSA relatively small package, other transactions were not” — he recalls.

The Manager says that sudden political decisions of the government have already taken into account in the risk assessments, but this does not affect the interest of foreigners to buy assets. “For example, the share of foreigners in the OFZ continues to grow,” he says. Therefore, foreign and Russian investors, says Zubrow, will take an active part in the following transactions for the sale of state assets if the terms seem attractive to them. “Investors are accustomed to act pragmatically. Especially if he see that investing in ALROSA have been met,” concludes Mr Zubrow. The date of posting (11 July 2016) shares of ALROSA increased by 12.5%, on Wednesday, August 17, the company’s securities traded on the Moscow exchange at RUB 76 per share.

According to analyst large European Bank, for an investor in the shares of the decision to postpone the privatization rather carries a negative connotation, but it is not beyond the risks to which many have long been accustomed to investing in Russian assets.

However, the SPO of ALROSA confirms that the demand for Russian assets in Russia and abroad, there is a road for future placements open, ” says head of global markets Sberbank CIB Andrey Shemetov. According to him, in recent years, the Russian economy demonstrates certain resilience to external shocks, which can not fail to attract the attention of investors. “The market may think that he underestimated Russia. In General we can speak about the potential market recovery, especially in the case of a withdrawal (albeit partial) sanctions,” said the investment banker.

The right to a break

Market participants hope that the government will not in the future to change plans for the privatization of other assets. Alexander Branis noted that the privatization of state-owned is usually carried out in a time when the state has need of money. “If, for example, oil will grow in value and budget revenues will grow, officials will be even more reasons not to carry out privatization,” he said. But the goal of privatization still is, to increase the share of private sector in the economy, and improve its growth rate, says the financier.

However, experts believe that the Russian government is entitled to wait with the privatization of such companies as “Bashneft” as long as oil prices do not recover. “Pressure on the Russian budget does not seem so serious to the state it was necessary to bring privatization to the end at the moment, come what may. Especially considering that ahead of the privatization of “Rosneft”, — said Bloomberg Intelligence analyst Philipp Chladek.

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