MIG AND IRKUT READY FOR SINGLE CORPORATION

MOSCOW, October 4 (RIA Novosti) - Chief of the Federal Agency for Industry Boris Alyoshin said recently that the government was studying the possibility of merging two aircraft building giants: MiG and Irkut. The merger will be difficult, he noted, because of the difference in the quality of the companies' assets. "It is impossible to establish either a completely state-run or private company," he explained. "We work towards a mixed form of property." According to Vedomosti, MiG is a state unitary enterprise, while Irkut is a public private company, not simply a joint-stock company.

Yelena Sakhnova, an analyst with United Financial Group, considers that it would be more logical to merge the companies by merging MiG with Irkut, thereby increasing the state's role. Bringing the assets together would allow the company to make considerable savings on costs and borrowings.

Thies Ziemke, a spokesman for Irkut shareholders - the Kreml Capital Management and Warburg Invest funds - believes a merger would benefit shareholders. "It is still unclear how the companies will be amalgamated, but even if our block of shares if diluted, its value will not be reduced," Mr. Ziemke pointed out. In his view, the merger, and also EADS' joining the Irkut shareholders, will be help the development of the entire Russian aviation industry.

The MiG Russian Aircraft-Building Corporation was established in 1999. According to the company, its portfolio of orders totals $1.4 billion.

The Irkut corporation was established on the basis of the Irkutsk Aviation Industrial Association and a number of research and design firms. It main produces Su-30MK fighters and Be-200 amphibious planes. Irkut president Alexei Fyodorov and nine managers of the company control about 57% of the shares, while about 14% belong to the Sukhoi holding company. The portfolio investors have a 25% stake.