(Adds company comment, market reaction)
ZURICH, April 9 (Reuters) - Swiss engineer Sulzer has agreed to buy five million of its own shares from its largest shareholder, Renova Holdings, which along with its Russian Chairman Viktor Vekselberg has appeared on a list of U.S.-sanctioned individuals and entities.
The company took the action to prevent it from being hit by U.S. sanctions after the U.S. Department of the Treasury's Office of Foreign Assets Control identified Vekselberg and his Renova Group, Moscow, as specially designated nationals on April 6.
Although the Winterthur-based company said it had not been contacted by U.S. authorities, after taking legal advice it decided to reduce the holding of Renova, which held 63 percent in Sulzer, to prevent problems arising in the future.
Following an emergency board meeting on Sunday, Sulzer made a binding agreement for Renova to transfer ownership to Sulzer of five million Sulzer shares, equivalent to 15 percent of its outstanding stock.
Sulzer said it would buy the shares at the volume-weighted average share price between Monday and Friday. At Friday's closing share price of 126.3 francs, the deal would have a value of 631.5 million Swiss francs ($658 million).
A company spokesman said Sulzer would pay for the shares only after U.S. sanctions were lifted. It had not yet determined how it would raise the money for this. Analysts said it should not have problems financing the purchase.
Sulzer shares had fallen 11.5 percent to 111.80 Swiss francs by 0930 GMT amid a broad retreat of stocks exposed to Russia.
"Sulzer 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 company said.
Sulzer said no decision had been made on what to do with the shares, which would be assigned to its treasury.
After completion Renova will be a 48.83 percent shareholder in the company, Sulzer said. ($1 = 0.9599 Swiss francs) (Reporting by John Revill and Oliver Hirt; Editing by Michael Shields and Mark Potter)