The deal aims to keep Sulzer free of sanctions after its majority shareholder appeared on a US list of sanctioned individuals and companies.
Following the inclusion of Viktor Vekselberg on a US Special Designated Persons (SDP) list 6 April, the Swiss pump manufacturer has agreed to buy five million of its own shares from the Russian businessman’s Renova Group to steer clear of American sanctions.
The sanctions are aimed at individuals benefitting from Russia’s ‘malicious’ activities, according to a Treasury Department release: “Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”
The purchase, announced 9 April, will see Vekselberg lose his controlling interest in the company. The deal also says that if Sulzer later sells the shares at a lower price, the price it eventually pays Renova will drop accordingly. As it stands, Sulzer will pay Renova for each share at the volume-weighted average share price quoted on the SIX Swiss exchange from 9 April to 13 April.
Sulzer is to buy five million shares from Renova, reducing Vekselberg’s holding from 63% to 48%. All Renova board members abstained from the decision to approve the deal. The transfer of the shares is due to happen this week, but the company will only pay Renova after it has been removed from the sanctions list.
The news saw Sulzer’s stock price tumble by over 20% between 9 and 11 April.
It’s being reported that UBS and Credit Suisse has ceased trading Sulzer shares to avoid the sanctions.
In a press release the company said that it is “in close contact with authorities and believes that this transaction will assuage any concern as to the independence of Sulzer from the Renova Group.” The Treasury Department’s Office of Foreign Assets Control (OFAC) only automatically applies sanctions to companies that have a majority shareholder that is subject to sanctions. If an individual is a SDP but owns less than 50% of a company’s shares, then sanctions do not automatically apply, but the company may be sanctioned at a later time.
This article was corrected 15:00 30/04, the original article said that the US list included sanctioned countries, this has been corrected to sanctioned companies.