Alisher Usmanov, Russia’s richest man, and two of his long-time billionaire investment partners have joined all of their assets in USM Holdings, a limited liability company based in the British Virgin Islands.
Conceived in early 2012 and completed in December, the new formation holds the trio’s assets in mining, technology, telecommunications and media, and carries a value of more than $29 billion, according to the Bloomberg Billionaires Index.
“We have completed the process of consolidating assets into USM Holdings,” Usmanov, 59, said by e-mail Feb. 5. “The formation of a single holding company enables us to optimize business processes, enhance the efficiency of managing subsidiary companies, and provide more opportunities to access international capital markets.”
According to the company’s website, which went live late last month, USM was established to consolidate the holdings Usmanov has built up during the last 30 years, including closely held Metalloinvest Holding Co., Russia’s largest iron ore producer, publicly-traded mobile phone company MegaFon OAO and Internet company Mail.Ru Group Ltd., as well as the technology investments he has made through the DST investment funds.
USM shareholders include Usmanov, who holds 60 percent; Vladimir Skoch, who holds 30 percent on behalf of his son, Russian Duma deputy Andrey Skoch; and Ardavan Farhad Moshiri, an Usmanov adviser of 23 years, who owns 10 percent.
Usmanov and Moshiri continue to hold their shared 29.9 percent stake in London-based Arsenal Football Club Plc separately. Usmanov owns all of newspaper Kommersant outside of USM.
Usmanov controls all of USM’s voting rights and also has the ability to block his partners from selling any assets it holds without his consent. He first disclosed his plans for the holding company in April 2012, and released further details of its formation in MegaFon’s preliminary prospectus, which was released in November.
Ivan Streshinskiy, who has helped manage Usmanov’s investments since 2006, was appointed to the USM Holdings board and named chief executive officer of USM Advisors, an affiliated company that will provide advisory services to the holding entity.
“Having all of the assets under one roof makes it easier to manage them and value them,” Kirill Chuyko, head of equity research at BCS Financial Group said by phone Jan. 21, explaining the possible reasons for structure.
The two minority partners acquired their stakes in USM by swapping their existing equity in holding companies controlled by Usmanov and making a cash investment. After the transaction, Usmanov has a net worth of $21.4 billion, according to the Bloomberg Billionaires Index, while Moshiri controls a $1.7 billion fortune. Skoch is valued at $6.2 billion.
Rollo Head, a spokesman for Moshiri at London-based RLM Finsbury, said Moshiri declined to comment on his net worth. Albert Istomin, a spokesman for Skoch, declined to comment on the net worth calculation. Usmanov also declined to comment.
Usmanov first met Andrey Skoch in 1992, when he was importing cigarettes to Russia and Skoch was working as an oil trader. At the time, the country was suffering from a deficit of consumer goods, which enabled Usmanov to build a thriving trade business.
He and Skoch purchased metal and mining assets during and after the country’s chaotic privatization years, including a steel plant in the Belgorod region, central Russia, and iron ore producer Lebedinsky GOK. In 2006, after buying Mikhailovsky GOK from Georgia’s current prime minister, billionaire Bidzina Ivanishvili, they created Metalloinvest, now Usmanov’s most valuable asset.
Usmanov’s rise to prominence was boosted in the early 2000s, when he proved to be an ally to the new government led by Russian President Vladimir Putin. As head of Gazprominvestholding, the investment arm of Russia’s gas monopoly OAO Gazprom, Usmanov helped negotiate the return of assets to state-run Gazprom that had been moved out of the company under previous management.
In 1999, Skoch was elected as a deputy of the State Duma, Russia’s main legislative body, representing the Belgorod region. He later transferred the fortune he had built to his father, Vladimir, shielding himself from public criticism. He was re-elected to the Duma four times.
Moshiri, an Iranian emigrate to London who now resides in Monaco, first met Usmanov in 1989, and has served as Usmanov’s financial consultant ever since. Through the years, he earned shares in some of Usmanov’s most important assets, including Metalloinvest, MegaFon and Arsenal.
The former accountant, who is a British citizen, resisted Usmanov’s diversification into technology investments, which began in 2008, using billionaire Yuri Milner’s DST funds.
“Moshiri also didn’t believe in the prospects for investments in Facebook and Groupon,” said Usmanov in an April 2012 phone interview with Bloomberg News.
His hesitation did not prevent Usmanov from allowing him the chance to participate, which has given Moshiri holdings through DST in publicly-traded Facebook (FB:US) Inc., Zynga Inc. (ZNGA:US) and Groupon Inc., as well as other investments in a number of closely-held technology companies, including Twitter Inc.
USM did not disclose how much Moshiri and Skoch may have paid to make those investments, or their exact stakes.
The new holding company requires a revised method for the Bloomberg ranking to calculate the net worth for Usmanov and Moshiri, and established a valuation for Skoch’s fortune.
Prior to the transaction, Usmanov and Moshiri controlled half of Metalloinvest through Cyprus-based Gallagher Holdings Ltd., which has since been renamed USM Steel & Mining Group Ltd. That stake was combined with the 30 percent held by Skoch. The remaining 20 percent of Metalloinvest was bought back by the company from Moscow-based OAO VTB Bank at the end of 2012 through debt financing, consolidating all of the company under the control of USM.
Further details on the debt financing will be provided when Metalloinvest releases its earnings in April, the company said.
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