Proceeds of a sale of a stake in Alrosa diamond giant will benefit local people, vows governor.
'This is a very lucrative transaction for the republic,' said Sakha's president Yegor Borisov. Picture of one of republic diamond mines: Alrosa
A total of $1.3 billion was raised in a share sale of 16% of the world famous diamond miner based in Siberia's Republic of Sakha, also known as Yakutia.
Of this, 7% was a stake from the regional government and this cash - some $560 million - will be used to improve the permafrost region's housing stock and infrastructure.
'This is a very lucrative transaction for the republic,' said Sakha's president Yegor Borisov. 'We have raised over 18 billion roubles from selling our 7% of shares. Proceeds will be mainly used for demolition of worn-out houses.'
He stated: 'Selling part of our shares has attracted additional investments to the republic.'
More than 80 percent of shares on offer were bought by foreign investment funds, including Lazard and Oppenheimer.
Interfax sources close to the deal said that it was over-subscribed to the tune of roughly $400 million, or by about a third. Among the buyers were major US investment funds, the Russian Direct Investment Fund (RDIF), and the pension fund Blagosostoyanie.
'We have raised over 18 billion roubles from selling our 7% of shares. Proceeds will be mainly used for demolition of worn-out houses'. Picture: Alrosa
The regional government now owns 25% plus one stock in Alrosa while the federal government's share remains at slightly over 50%. The federal authorities sold 7% and the remaining two percent was from offshore Wargan Holdings Limited, controlled by Alrosa.
The sale puts the value of Alrosa at $8.12 billion, reported Reuters.
First Deputy Prime Minister Igor Shuvalov said the pricing of the Alrosa sale showed a robust level of investor interest. 'There was a proposal to set a lower price limit of about 33 roubles,' he said at a ceremony to launch the sale at the Moscow Stock Exchange. We took a risk and set the price at 35 roubles ... both the oversubscription and the quality of investors show that the decision was correct.'
The Republic of Sakha is the largest geographically in the Russian Federation, and is only slightly smaller than India.
The housing stock - much dating to Soviet times - is built on permafrost.