Fosun buys stake in Russia's top gold miner for $887 mln

MOSCOW/HONG KONG (Reuters) - A consortium of investors led by China's Fosun International Ltd 0656.HK will buy a 10 percent stake in Russia's top gold producer Polyus PLZL.MM for $887 million, they said on Wednesday.

Fosun International Ltd services are displayed at a news conference in Hong Kong, China March 29, 2017. REUTERS/Bobby Yip

Russia, the world’s third largest gold producer, has been looking for investments in Asia, mainly in China, since the West imposed sanctions on Moscow due to its role in the Ukraine crisis and the annexation of Ukraine’s Crimea peninsula in 2014.

China is the world’s top consumer, producer and importer of gold and Chinese companies have been targeting gold mine acquisitions.

Fosun, an acquisitive Chinese conglomerate, will buy 12,561,868 Polyus shares for $70.6025 per share from the family of Russian tycoon Suleiman Kerimov.

“We are delighted to enter into this agreement to acquire a significant stake in Polyus,” Wang Qunbin, Fosun’s Chief Executive, was quoted as saying in Polyus’ statement.

The consortium, which includes two of Fosun's affiliates - Zhaojin Mining 1818.HK and Hainan Mining 601969.SS - will be a strategic long-term shareholder, he said.

The deal is the first major foreign investment for Wang who replaced Liang Xinjun as CEO in late March. Liang, who was Fosun’s public face for years and was instrumental in driving Fosun’s overseas expansion, stepped down in a surprise reshuffle that created uncertainty over the group’s strategy.

Fosun has been in talks since last year to buy a Polyus stake, sources have said. The deal was announced one day before the start of the St Petersburg International Economic Forum, the country’s annual event to attract investors.

Kerimov’s family also said that their firm Polyus Gold International Limited (PGIL) had granted the consortium an option to acquire up to an additional 5 percent in the company for $77.6628 per share by the end of May 2018.

Polyus shares were down 0.5 percent in Moscow on Wednesday at 4,425 roubles ($77.87).

The price for the initial stake purchase values Polyus at $9.0 billion and the deal is expected to be done by the end of 2017.

The agreement also provides for minimum annual dividend payments by Polyus for 2017-2021 at the greater of 30 percent of its full-year core earnings, known as EBITDA, or $550 million for each of 2017, 2018 and 2019 and $650 million for each of 2020 and 2021.

Polyus, whose free-float is currently at 6.8 percent, is also considering launching a secondary share offering in London and Moscow in June, sources familiar with the matter have said previously.

“PGIL and the consortium committed to cooperate to ensure the company complies with the requirements of the Moscow Exchange where its ordinary shares are listed, as well as the requirements of foreign exchanges where the company’s equity securities may be listed in the future,” PGIL said.

($1 = 56.8246 roubles)

(Refiles to refer to Fosun CEO by his surname, Wang, in paragraph 7)

Reporting by Polina Devitt and Julie Zhu; editing by Alexander Smith and Jane Merriman