UPDATE 1-AvtoVaz stakes offered to metals tycoons


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By Guy Faulconbridge

MOSCOW, Sept 28 (Reuters) - Russia's Rosoboronexport plans to relinquish control of the country's biggest carmaker, AvtoVaz , by selling stakes to two Russian metals billionaires and a major foreign carmaker, company officials said on Friday.

Sergei Chemezov, the head of the Rosoboronexport state arms exporter, said he had offered to sell 5 to 10 percent stakes in AvtoVaz to billionaires Alexei Mordashov and Alisher Usmanov.

"We could sell, if they are interested in buying. But it is not a blocking stake in any case, it could be 5 to 10 percent," Chemezov told reporters at a conference on machine building.

A company source told Reuters the metals billionaires could be offered as much as 20 percent in AvtoVaz and that Rosoboronexport wanted to finally end up with a blocking stake of 25 plus one share in the car maker from 75 percent now.

Chemezov said he was interested in selling a blocking stake to a major U.S. or European car marker which would act as a strategic investor.

"We are prepared to sell a blocking stake to a strategic partner," Chemezov said. "By strategic investor we mean a major carmaker and as there is none of that size in Russia there remains only major Western, U.S. or European, companies."

"With such companies we are holding talks and we are prepared to sell a blocking stake," he said.

But talks with foreign carmakers have made little progress.

Under President Vladimir Putin, Rosoboronexport rose to become a major player in Russia's giant metals sector, taking control of AvtoVaz in 2005 and VSMPO-Avisma , the world's largest titanium producer, the following year.


Rosoboronexport's rise into one of the country's biggest industrial groups raised concerns about the Kremlin's rising power in the economy.

Kremlin officials maintained Rosoboronexport's takeover of AvtoVaz was aimed at imposing order at the ailing car maker, which had been linked with criminal gangs.

AvtoVaz, maker of the Lada car, has been losing market share as it struggles to compete with foreign competitors for a slice of Russia's booming car market.

Chemezov, a friend of Putin, said he had proposed that Mordashov and Usmanov, ranked as Russia's 9th and 18th richest men by Forbes, start production of automotive sheet for use in AvtoVaz.

"We proposed the start production of modern and quality automotive sheet, unfortunately no-one produces quality sheet... and we would guarantee purchases of that sheet," Chemezov said.

"As a type of bonus, so that they could control those purchases, they could buy a stake," he said.

Mordashov heads metal firms Severstal , Russia's largest steelmaker, and Usmanov controls Metalloinvest, Russia's fifth-largest steel maker and producer of nearly 40 percent of the country's iron ore.

A stake of 25 percent or a "blocking stake" allows the holder to block significant decisions at the firm's board level.



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