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Uralkalis Board of Directors Approves a Programme to Purchase its Common Shares and Global Depositary Receipts

25.08.2015
Uralkalis Board of Directors Approves a Programme to Purchase its Common Shares and Global Depositary Receipts

Public Joint Stock Company Uralkali announced today that its Board of Directors at the meeting on 24 August 2015 approved a programme to purchase its common shares and Global Depositary Receipts in the amount of up to 411,042,224 common shares at the purchase price of US$3.2 per common share (payable in Russian Rubles based on the exchange rate of the Central Bank of Russia effective on the date of the announcement of the results of the purchase programme) and US$16 per Global Depositary Receipt, with the total purchase amount not exceeding US$1.32 billion

Public Joint Stock Company Uralkali (LSE: URKA; the “Company”), one of the world’s largest potash producers, has approved a programme to purchase the Companys common shares (Common Shares), including Global Depositary Receipts (GDRs) representing Common Shares, in the amount of up to 411,042,224 Common Shares, in any combination of Common Shares and GDRs (the Common Shares and GDRs, individually or together, the securities and each a security), representing up to 14% of the Companys issued and outstanding shares. The purchase price for the securities tendered is US$3.2 per Common Share (payable in Russian Rubles based on the exchange rate of the Central Bank of Russia effective on the date of the announcement of the results of the repurchase programme) and US$16 per GDR, with the total purchase amount not exceeding US$1.32 billion (the Repurchase Programme). The Repurchase Programme is expected to be funded from existing cash balanceand external financing. The Company currently plans to eventually cancel the acquired Common Shares, including those represented by GDRs. Until such cancellation, the securities may be used as security for financings by the Uralkali group, including derivative transactions and repo transactions, as well as for other general corporate purposes.

Taking into account the relative advantages and disadvantages of maintaining the dual listing of GDRs on the London Stock Exchange (the LSE) and Common Shares on the Moscow Exchange, the Board of Directors also decided that maintaining a listing of GDRs on the LSE is not a strategic priority of the Company. In the event of a further decrease in the free float of GDRs on the LSE, the Board of Directors may consider delisting of the GDRs from the LSE. The Board of Directors has also decided to amend the Deposit Agreement of the Company with The Bank of New York Mellon (the Depositary), dated 15 August 2006, as amended (the Deposit Agreement), to remove the obligation to use the Companys reasonable efforts to relist the GDRs on another EU exchange, reduce the term of notice to GDR holders for the termination of the Deposit Agreement, including with respect to Regulation S GDRs, from 90 days to 30 days, and reduce the period of notice to the GDR holders for any amendments to the Deposit Agreement that are materially prejudicial to the interests of GDR holders (as a class), from three months to 30 calendar days.

The Board of Directors, having considered the limited liquidity in Rule 144A GDRs and the low level of trading on the LSE, also approved amendments to the Deposit Agreement relating to the termination mechanics of the Rule 144A GDR facility in the Deposit Agreement and an application to the UKLA and the LSE to remove the 144A GDRs from the Official List of the UKLA and cancel the admission to trading of the Rule 144A GDRs. Under the amendments to the Deposit Agreement, if Uralkali gives notice to the Depositary 45 days prior to the proposed termination date that it wishes to terminate the Rule 144A GDR facility, the Depositary will be able to terminate the Rule 144A GDR facility following a 30 calendar days notice to the GDR holders. In that 30-day period, holders of Rule 144A GDRs may withdraw the Common Shares represented by their GDRs, or exchange their Rule 144A GDRs for Regulation S GDRs, subject to the terms and conditions and fees set out in the Conditions (as defined in the Deposit Agreement) applicable to the GDRs. If any Rule 144A GDRs remain outstanding at the end of the 30-day notice period, the Depositary will sell the Common Shares represented by such Rule 144A GDRs and distribute the net proceeds of the sale in accordance with the Deposit Agreement.

Background and Purpose of the Repurchase Programme

On 11 June 2015, Enterpro Services Limited (Enterpro) completed its tender offer for up to 468,750,000 of the outstanding Common Shares, including GDRs representing Common Shares, of the Company. Pursuant to the tender offer, Enterpro purchased in the aggregate approximately 11.56% of the outstanding Common Shares. As a result of the tender offer, the number of Common Shares and GDRs held in the free float (in other words, excluding Common Shares and GDRs held by the Companys major shareholders and subsidiaries), immediately following such tender offer equalled approximately 23.35%.

At its meeting held on 23 June 2015, the Board of Directors of the Company reviewed the results of the Enterpro tender offer completed on 11 June 2015 and requested the Audit Committee to evaluate the benefits of the listing of GDRs on the LSE and present its recommendations for the consideration of the Board of Directors by the end of August 2015. Subsequent to the 23 June 2015 request from the Board of Directors and as part of the on-going evaluation, the Audit Committee also reviewed the possibility of a new tender offer for Common Shares and GDRs of the Company. Over the course of the two months following the 23 June 2015 meeting of the Board, the review process of the Audit Committee was led by its Chairman Paul J. Ostling, independent non-executive director, and followed a special procedure that included separate meetings of the full Committee as well as meetings consisting entirely of the Chairman and Sir Robert J. Margetts, independent non-executive director, who had access to financial and legal advisers.

To assist the Audit Committee and the Board of Directors of the Company in their review of the Repurchase Programme, the Company engaged financial and legal advisers. The Audit Committee, including the independent non-executive directors, having considered the advice of its financial advisors and other matters it deemed relevant, at the meeting on 24 August 2015 unanimously recommended to the Board of Directors of the Company that the principal terms of the Repurchase Programme be approved. On 24 August 2015, the Board of Directors of the Company resolved to approve the principal terms of the Repurchase Programme.

Taking into account the Companys cash balance (with a cash balance (including deposits) of US$2.5 billion as at 30 June 2015), reasonably moderate leverage levels, the absence of immediate investment opportunities, and the impact on the Common Shares, including those represented by GDRs, from the geopolitical uncertainties and an unfavourable environment affecting the Russian equity markets since early 2014, the Board of Directors determined that there was an opportunity for the Company to utilize part of its cash balance for the purposes of a repurchase program by way of a tender offer. The Repurchase Programme will provide a selling opportunity to those shareholders who may desire to reduce partially or fully their investment exposure to the Company.

The Board of Directors decided that, given that benefits and value of the listing of Common Shares on the Moscow Exchange have been enhanced by recent actions strengthening the listing regime in Moscow, significant improvements in alignment with the international standards have been introduced to the infrastructure of the Moscow Exchange, the current market and regulatory environment, and the decrease in the liquidity and free float of the GDRs on the LSE, the listing of the GDRs is not a strategic priority of the Company. In the event of a further decrease in the free float of GDRs on the LSE, including as a result of prior repurchase programs and the Repurchase Programme, the Board of Directors may consider delisting the GDRs from the LSE.

If a delisting of GDRs on the LSE occurs following the expiration of the Repurchase Programme, then, given the repurchases of Common Shares and GDRs made to date and the Repurchase Programme, it is not expected that such potential delisting will be accompanied by a further repurchase program of Common Shares and GDRs.

The decision whether or not to tender securities in the Repurchase Programme entails certain risks and considerations. In deciding whether or not to tender securities in the Repurchase Programme, holders of Common Shares and the GDRs are urged to consider the information that will be contained in the Tender Offer Memorandum to be issued by Enterpro and seek independent financial and legal advice.

The amendments to the Deposit Agreement approved by the Board of Directors at the meeting on 24 August 2015, will become effective upon the expiration of three months after a notice of such amendments is given to the GDR holders by the Depositary. The Company expects that the notice will be given on or after the date the Tender Offer Memorandum to be issued by Enterpro. Under the terms of the Deposit Agreement, GDR holders may, during the three month-period commencing upon such notice, receive Common Shares represented by their GDRs upon surrender thereof to the Depositary, payment of charges and satisfaction of the other conditions set forth in the Deposit Agreement and the Conditions (as defined in the Deposit Agreement).

The 2014 Integrated Report is available on the corporate website http://www.uralkali.com/investors/reporting_and_disclosure/annual/.

PJSC Uralkali (www.uralkali.com) is one of the worlds largest potash producers and exporters. The Companys assets consist of 5 mines and 7 ore-treatment mills situated in the towns of Berezniki and Solikamsk (Perm Region, Russia). Uralkali employs ca. 11,000 people (in the main production unit). Uralkalis common shares and GDRs are traded on the Moscow Exchange and London Stock Exchange, respectively.

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