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New wave of privatisation in Russia – a rare opportunity for investors


Following the last wave of privatisation in Russia in the early nineties, a number of the affected entities subsequently reverted to being publicly owned. This time round, the Russian Government is planning a new wave of privatisation to offset the shortfall in the federal budget brought upon by the low global oil price. The aim is to raise up to RUB 800 billion (approx. EUR 9.4 billion) in order to address this shortfall. In light of the devaluation of the Russian currency (which has lost more than half of its value to the Euro and the US dollar), these privatisation plans offer a rare opportunity for investors to acquire shares in some of the jewels of the Russian economy at an attractive price.

The new round of Russian privatisation already includes small and medium enterprises from a wide range of sectors, such as agriculture, fishery, food, wood, paper, publishing, oil & gas, chemicals, metallurgy, power, construction, hotel and transport. Companies that have been put up for privatisation (as well as the relevant shareholding on offer) are listed in the Russian Government Resolution No. 1111-r dated 1 July 2013, as amended from time to time and most recently on 9 February 2016 (the “Resolution”) (here in Russian). The state is, for example, withdrawing from the operating companies of a number of regional airports including Anapa, Arkhangelsk, Elista, Komsomolsk-on-Amur, Kurgan, Murmansk and Nizhny Novgorod.

Since December 2015, the Russian Government has been actively discussing further amendments to the Resolution, floating privatisation plans in respect of Russian majors from a number of key sectors, including oil & gas (Rosneft and Bashneft), transport (Aeroflot, Sovcomflot, RZD), financial (VTB) and mining (Alrosa). Government officials have reported significant interest from investors within the Russian business community. The privatisation plans have the support of the Russian President, who noted that only legal entities incorporated in Russia will be eligible to take part in the privatisation programme. Interestingly, however, no restrictions were imposed in relation to the foreign ownership of such entities.

As the final decision of the Russian Government is imminent, investors are advised not to delay any necessary preparation steps should they wish to take up the opportunity.

CMS Client Alert | Corporate/M&A | February 2016
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Vladimir Zenin