Russian tycoon buys 1.5% stake in VTB

By Catherine Belton in Moscow

Published: February 17 2011 02:38 | Last updated: February 17 2011 02:38

Suleiman Kerimov, the Russian tycoon, bought $500m in VTB shares during the state-controlled bank’s secondary public offering, giving him a 1.5 per cent stake, people familiar with the matter said.

The bank had previously said Generali, the Italian insurer, was the biggest buyer of VTB shares in the $3.3bn sale of the 10 per cent stake, purchasing $300m in shares. But it emerged on Wednesday that Mr Kerimov, a politically well-connected financial investor, had put in a huge order for shares too.

Mr Kerimov built a fortune of more than $15bn before the crisis by borrowing billions of dollars in loans from Sberbank, the state-controlled savings bank, and using the funds to build substantial stakes in Sberbank and Gazprom, the state-controlled gas export monopoly. He has since sold down those stakes.

But he is now acting as a key broker in the creation of a Russian national champion in the fertiliser industry via the merger of UralKali, the Russian potash group, and Silvinit, its Russian rival. Mr Kerimov acquired a 25 per cent stake in UralKali last year with the help of billions of dollars in VTB loans. Together with business associates, he controls the company.

One person close to the offering said organiser banks had declined to grant Mr Kerimov’s entire order for shares because they did not want the sell-off to be seen as “too Russian”, preferring instead to emphasise the broad foreign investor base buying into the offering. CIC, the Chinese sovereign wealth fund, acquired $100m worth of shares, as did TPG, the US private equity group.

Mr Kerimov’s representatives could not be reached for comment.

One market participant had speculated the Kremlin had ordered Russia’s oligarchs to bid for the shares in order to ensure that the offering, the first in an ambitious government privatisation drive, did not fail. The person close to the offering said other Russian billionaires had also put in orders, but claimed the bank had declined to grant them, preferring instead to allocate shares to long-term foreign investors, with the book 1.6 times oversubscribed.

Russian investors took up only 15 per cent of the whole offering, VTB said.

VTB shares climbed a further 3 per cent on Wednesday after Renaissance Capital, the Moscow investment bank, said the MSCI benchmark Russia index could increase its weighting for VTB from 1.9 per cent to 3.1 per cent following the offering.

The bank’s London-traded depositary receipts closed at $6.70, 7 per cent up on the offering price of $6.25.

This article has been changed since original publication to reflect the correct size of Suleiman Kerimov’s stake in VTB after his recent purchase. His stake amounts to 1.5% and not 1.2% as earlier published