Precious metals miner Polymetal is looking for an exit from Russia in order to avoid nationalization or other forms of expropriation and agreed to sell its Russian unit in a deal valuing it at $3.69 billion.
Polymetal International plc said on Monday it had reached an agreement to sell JSC Polymetal, or Polymetal Russia, to JSC Mangazeya Plus, an entity established for the purpose of the transaction by Russian precious metals miner Mangazeya Mining. The buyer is a subsidiary of Mangazeya Group owned by Sergey Yanchukov.
The agreed terms of the deal value Polymetal Russia at 5.3 times its enterprise value/EBITDA, Polymetal International said.
Completion of the transaction is subject to a number of conditions, including shareholder approval.
Polymetal Russia was designated by the U.S. Department of State in May 2023, which explicitly refers only to the Russian unit of Polymetal International, the company said.
With the deal announced today, "A quick, transparent, and sanctions-compliant exit under the terms of the proposed Transaction serves the interests of all stakeholders," Group CEO Vitaly Nesis said in a statement.
"The completion of the divestment will allow the Group to de-risk the Company's business, deliver stable cash flows and pursue new investment opportunities. The Board recommends shareholders to vote for the proposed resolution," Nesis added.
Explaining the rationale for the deal, Polymetal's board "considers that the Transaction presents the most viable opportunity for the Group to restore shareholder value by removing or substantially mitigating critical political, legal, financial and operational risks to the Polymetal Retained Group."
The Board believes that the current structure of the Group "continues to expose the Company to unacceptable levels of risk associated with its Russian operations and risks full destruction of value of Polymetal Russia to Shareholders."
The main consideration for the group's board to seek an exit has been "material risk of nationalization or other form of property expropriation of Polymetal Russia by the Russian Government," Polymetal International said.
Polymetal is aware that the financial terms of the deal are not ideal, "But now it is more important to complete a satisfactory deal quickly than to continue striving for a good deal," Nesis told the Financial Times in an interview.
"It's the question of uncontrollable risks of catastrophic nature."
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More