05 Mar 2013

Rostec to offer Radio-Electronic Technologies to investors


Radio-Electronic Technologies Concern (RETC), a State Corporation «Russian technologies» subsidiary, is getting ready for the first public listing at the end of 2015. Additional shares will be issued for RETC to obtain the core assets owned by Rostec. State Corporation representatives anticipate RETC’s IPO will be more successful than collapsing Russian helicopters’ public offering. However, analysts notice that RETC ventures are scattered and many of them don’t manufacture end products.

Concern will announce additional issue for 50 billion roubles in the preparation for IPO. RETC has been the first to arrive at the issue recording and is now all ready for the assets transferring. The calculations were based upon the balance sheet assets, which are to be handed over to RETC. The concern has to hold public offering within a year after recording. All papers will be passed to the State Corporation and RETC will get stocks of 46 enterprises (regardless of the subsidiary and associated companies focused on the production of electronic warfare, IFF systems, electric connectors and avionics) in payment. Currently most papers are on the balance sheet of Rostec, however, Federal Property Management Agency didn’t fully hand the ownership rights over to some enterprises.

JSC Concern Radio-Electronic technologies was established in 2009 in order to manage the assets of Rostec. The Concern comprises enterprises designing and producing electronic warfare, IFF systems, radio-measuring devices, electric connectors, cable products. RETC has R&PA Kvant (mobile systems of electronic warfare), Aircraft Engineering Concern (avionics), Shimko Radioelektronika scientific development and production center (primary Parol IFF system developer) among its major assets. The holding company employs approximately 30 thousand people. Defence Ministry and other power departments, Rusatom, Russian Federal Space Agency are the largest clients of RETC. 100% shares of the Concern is owned by Russian Technologies. Nikolay Kolesov is the general director of the enterprise. Anticipated revenues in 2013 are 70 billion roubles and net profits are expected to be 5 billion roubles.

Additional issue will start restructuring the very relationship system of holdings and Corporation centre, the holdings will gather more independence. Rostec strategy considers the holdings to assume the functions of operational management of the business. The holdings are to become the new added value centres, to obtain strategic companies and assets providing the competitiveness on the global market and investors appeal. Some holdings’ management will also ensure the increase of revenues and Russian/international market shares. The Corporation centre will provide strategic management, boost interaction between holding companies and government and control the State Procurement.

RTEC will be the first in Rostec to hold an IPO at the end of 2015. Currently the Concern is inviting a tender for the company to carry out holding’s IFRS and audit. Rostec plans to hold public offering in 6 subsidiary holdings (Ruselectronics, UEC, RT-Biotechprom, Shvabe, RETC and Russian Helicopters) in the next 5 years. Russian Helicopters had already tried to hold an IPO, but investors didn’t show great interest in its stocks and the idea was indefinitely postponed. The holding was needing the funds to partially pay off a debt of almost $1 billion. According to some sources, Russian Helicopters was too large to instantly hold an IPO and RTEC is more suitable for the first public offering in Rostec.

Mikhail Pak, analysis from Aton believes, RTEC IPO outlooks are extremely hard to forecast as it is yet uncertain if Rostec will arrange this structure to be interesting for foreign investors. The Corporation is intended to sale the stocks to portfolio investor and thus it needs to have a well-defined structure. Currently the concern is a rather uncoordinated business comprising over 50 manufacturers and R&Ds. Many of them don’t fabricate end products, which might exacerbate the search for investors. Rostec will draw additional financing from government for the account of IPO preparations, especially R&D and technical retooling.

Source: Kommersant