* Management, Gazprombank buy control of VSMPO-Avisma
* Deal valued at $965-$970 mln
* Unwinds 2006 acquisition by state arms-to-metals group (Adds deal details, financials, analyst)
By Alexei Anishchuk
MOSCOW, Nov 27 (Reuters) - State conglomerate Russian Technologies is selling control in the world's biggest titanium company through a management buyout, unwinding an acquisition that fell short of its promise to consolidate the sector.
VSMPO-Avisma, which accounts for around a quarter of the world's output of the light metal used in aircraft construction, is being bought out by a joint venture between the company's management and state-affiliated Gazprombank in a deal worth up to $970 million.
Russian Technologies head Sergei Chemezov, who like President Vladimir Putin was a KGB agent in 1980s East Germany, championed the original acquisition in 2006 but the arms-to-metals group struggled to repay debts it assumed for the deal.
The venture, Cyprus-based Nordcom, will buy 45.4 percent of VSMPO-Avisma from Russian Technologies for an estimated $965-$970 million, VSMPO-Avisma Chief Executive Mikhail Voevodin told reporters on Tuesday.
"We as shareholders will continue to expand our share of the global titanium market," Voevodin said, adding that in addition to the aircraft market VSMPO would develop its product lines for health, auto making, and oil and gas production.
Including management's existing shares, Nordcom will own 50 percent plus one share in VSMPO-Avisma, while Russian Technologies will retain a blocking minority stake of 25 percent plus one share.
The deal was priced at $187 per share, a 16 percent premium to VSMPO's average share price over the last three months, lifting the firm's lightly-traded shares as much as 4 percent in Moscow.
Russian Technologies bought 70.42 percent of VSMPO-Avisma for $125 per share in 2006, when the company was valued at $1.18 billion, according to the company's data.
"The move is positive for the market's perception of the company," Boris Krasnojenov, a sector analyst at Renaissance Capital, said in a note.
"We believe the major shareholders, in their management role, will be interested in maximising profits, increasing capitalisation and improving VSMPO-Avisma's transparency, which could attract (investor) interest."
The deal should close in one to two weeks after approval by Russian's anti-monopoly office. Financing is being provided by a group of banks led by state-controlled Sberbank.
The precursor of Russian Technologies, state arms trader Rosoboronexport, took control of VSMPO-Avisma in 2006 in a deal that Chemezov said at the time would herald a merger of titanium assets in Russia, Kazakhstan and Ukraine.
In April this year, Chemezov asked the Russian government for aid in repaying a $790 million loan from Sberbank and VTB that funded the original purchase.
"Now the company is financially stable and has secure orders," Chemezov said in a statement. He added that VSMPO-Avisma had long-term orders stretching to 2018 from U.S. plane maker Boeing, one of its major clients.
VSMPO, which also has long-term contracts with Airbus and other plane makers, plans to increase it titanium production to 40,000 tonnes per year by 2015 from 27,000 tonnes in 2007.
Its net income is expected to be 7.1 billion roubles ($228 million) in 2012, the company said. Its debt is seen at $800 million.
Prior to the transaction, Russian Technologies owned 70.42 percent of VSMPO-Avisma, management owned 4.6 percent and the remaining 24.98 percent was in free float.
Gazprombank, which was founded by Gazprom, is still 35.5 percent owned by the state gas export monopoly, with further stakes held by affiliated entities such as its pension fund. State development bank VEB also owns a 10.2 percent stake. ($1 = 31.0140 Russian roubles) (Reporting by Alexei Anishchuk; Writing by Douglas Busvine and Polina Devitt; Editing by Erica Billingham)