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Alliance and Russian Technologies create JV to finalize AVTOVAZ partnership

Dec. 12 – Moscow – The Renault-Nissan Alliance and Russian Technologies State Corporation have created a joint venture to hold their entire equity interests in AVTOVAZ and serve as a stable, long-term controlling shareholder for Russia’s largest car company and the owner of the LADA brand.

Renault-Nissan Chairman and CEO Carlos Ghosn announced creation of Alliance Rostec Auto BV at a ceremony in Moscow with Sergey Chemezov, General Director of Russian Technologies and Chairman of the Board of AVTOVAZ, and Igor Komarov, President of AVTOVAZ.

“Today’s historic agreement is a win-win-win for all companies: Renault, Nissan and AVTOVAZ. It is a significant new chapter in an already solid partnership,” Ghosn said. “The joint venture will help accelerate our Russian market offensive. It will support the competitiveness of AVTOVAZ, Russia’s auto industry leader.”

According to the terms of the deal, Renault-Nissan will invest RUB23 billion (US$ 742 million). The investment will give Renault-Nissan 67.13% of the joint venture by mid-2014. The joint venture will then hold 74.5% of AVTOVAZ.

Renault, which purchased 25% of AVTOVAZ in 2008 and then helped AVTOVAZ in its successful turnaround, will invest about RUB11.3 billion (US$ 366 million) in the joint venture and plans to own 50.1% in the joint venture by June 2014. Nissan which did not previously own a stake in AVTOVAZ, will invest RUB11.7 billion (US$ 376 million) and plans to own 17.03% in the joint venture by the same period.

Over the same period, Russian Technologies will hold 32.87% of the joint venture.

As part of the deal, Russian Technologies is restructuring its outstanding loans with AVTOVAZ with RUB8 billion (US$ 258 million) proceeds from the anticipated sale of AVTOVAZ’s non-core assets being used to repay part of Russian Technologies loans. The remainder of circa RUB46 billion (US$ 1.48 billion) of interest-free debt is being extended until 2032. This gives AVTOVAZ a strong balance sheet with no liquidity constraints.

By the completion of the deal in 2014, Alliance Rostec Auto BV will have bought out all the shares in AVTOVAZ currently owned by the company Troika Dialog Investment Ltd.

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