US sanctions rock Russian billionaire’s Swiss investment empire
RUSSIAN billionaire Viktor Vekselberg’s constellation of Swiss industrial companies got hammered last Monday by investors after the US imposed sanctions on the oligarch and his Renova Group investment vehicle.
Renova owns stakes in three Switzerland-based equipment manufacturers, Sulzer, OC Oerlikon and Schmolz + Bickenbach, as well as a holding in United Co. Rusal, the giant aluminum producer owned by Oleg Deripaska, another billionaire hit by the measures. Shares in the companies tumbled even as Vekselberg, 60, took steps to lower his stake in Sulzer to below a majority in a bid to insulate the company.
The US Treasury on Friday included Vekselberg and Renova on a list of oligarchs, companies and senior government officials subject to sanctions that it said were intended to punish the country for actions in Crimea, Ukraine and Syria, and for attempting to subvert Western democracies. After founding Renova in 1990 and accumulating interests in Russia’s oil, gas and aluminium industries, Vekselberg bought stakes in Oerlikon in 2006 and Sulzer the following year as part of an expansion outside his home country.
The Russian citizen, who makes regular appearances at the World Economic Forum in Davos, spends some of his time in Switzerland. His net worth is US$ 16.4 billion, according to Bloomberg’s billionaires index. In addition to the Swiss and aluminium holdings, he also controls Russian regional airports.
In 2013, he sold 12.5 per cent of Russian oil joint venture TNK-BP for US$ 7 billion to the company’s state- owned oil company, Rosneft.
The businessman on Monday unveiled a plan aimed at shielding Sulzer from the US measures.
To “minimise disruptions to Sulzer’s business,” Renova will transfer 5 million shares back to the industrial-pump manufacturer, according to a statement, bringing its holding to under 49 per cent.
It previously held about 63 per cent of the company, based on data compiled by Bloomberg.
Sulzer is exposed to the sanctions because Vekselberg’s shareholding is above 50 per cent, according to Baader Helvea analyst Reto Amstalden, adding that this is not the case for Oerlikon and Schmolz. Vekselberg holds a 43 per cent stake in Oerlikon and 25 per cent in Schmolz, according to the companies.
“Oerlikon is neither considered a sanctioned nor a blocked party because Mr Vekselberg’s ownership interest in Oerlikon is less than 50 per cent,” the company said in a statement.
Sulzer stock fell 14 per cent to 108.30 francs at 3.37pm in Zurich, according to data on the Swiss exchange’s website.
At this price, the transferred shares would be worth about 542 million francs ( RM2.2 billion). Oerlikon shares fell 5.7 per cent while Schmolz dropped six per cent.
Schmolz, a maker of specialised steel, said in a separate statement that it expects “not to be materially affected” by the US sanctions because Renova holds “substantially less than 50 per cent” of the company.
The transfer of shares from Renova to Sulzer would increase the latter company’s net debt to onr billion francs, which may be temporary if the stake is placed elsewhere, Baader’s Amstalden said.
Sulzer said it’s “in close contact with authorities and believes that this transaction will assuage any concern as to the independence of Sulzer from the Renova Group.”
The share transfer will happen “during the course of the week.”
In a sign that the effects of the US sanctions are still unclear, Sulzer also specified Renova will be paid only after Sulzer receives confirmation that the payment “does not expose Sulzer to the risk of primary or secondary sanctions,” it said.
The purchase price will be based on Sulzer’s trading this week and will be reduced if the stock drops, or if the company sells the Renova stake to another buyer at a lower price, it said.