Vedomosti: “Opting for State Capitalism”
The state prepares to buy out company shares
Yevgeniya Pismennaya
The state is prepared to buy into the capital of big businesses. Companies, however, are not going to plead with it to buy their stock.
Yesterday, Prime Minister Vladimir Putin said that the state's participation in the large-scale purchase of big business capital was not ruled out. This might become necessary if the measures being taken fail "to bring the state's money to those who need it," he said.
Mr Putin said the state would purchase corporate capital only if invited by their managers. He described a buyout as "a way to save a business from the crisis." Later, the Prime Minister promised that everything would be returned to private owners "on fair terms."
The Prime Minister's spokesman, Dmitry Peskov, says there are direct and indirect ways for the state to participate in the capital of companies. He cited an example of indirect joining. Recently, to breathe life into the Saturn research and production association, a new shareholder scheme was adopted. A Government meeting on December 2 decided to make Saturn and the UMPO (Ufa Engine Building Industrial Association), of which Saturn owns 18%, part of the United Engine Building Corporation controlled by Oboronprom (with 30% of it belonging to Russian Technology). Mr Putin promised that Oboronprom would buy out the stake from private investors at market price, while Russian Technology would take care of Saturn debt, Mr Peskov added. He does not know if other companies asked the Government to buy shares.
A Finance Ministry official said the Government had not yet issued instructions on how the budget would allocate funds to purchase newly issued stock shares. Mr Peskov believes the federal budget could be amended to allow for the necessary provisions.
The Finance Ministry official said that direct buyouts by the state of newly issued shares of strategic companies could be "employed on a wide scale." No such instructions have yet been issued, however, said a Government official.
This is better than bankruptcy, said Sergei Polonsky, president of Mirax Group, but there are plans yet. "This is a sensible initiative and could be the only way out for many construction firms," said Mikhail Balakin, from the Su-155 state corporation, adding that his company "does not have financing problems."
Uralkali, UC Rusal, Evraz Group, Norilsk Nickel, and TMK declined to comment. These companies are not discussing the additional issue of shares for the benefit of the state, or the state buying their shares.
