Russian billionaire Vladimir Potanin’s offer to buy United Co. Rusal’s stake in OAO GMK Norilsk Nickel for $9 billion is “the beginning of an end” in a feud between the company’s two largest shareholders, UralSib Financial Corp. said.
“One of the two sides has to leave,” said Chris Weafer, chief strategist at the Moscow-based brokerage. “There is no other solution available. We have now clearly entered a more proactive phase in this conflict.”
Potanin wrote to Rusal Chairman Viktor Vekselberg Oct. 22 urging him to discuss selling Rusal’s 25 percent in Russia’s biggest mining company. Rusal said in an e-mailed statement it won’t sell its “strategic” investment. Potanin, whose Interros Holding Co. holds 25 percent of Norilsk, said he viewed Rusal’s statement as “taking a pause” to consider it.
A feud between Potanin and Oleg Deripaska’s Rusal dating back to 2008 reignited after a June election of the Norilsk board that gave Rusal three seats to Potanin’s four. A majority of Norilsk investors on Oct. 21 voted against Rusal’s motion to re-elect the board in a blow to Deripaska’s ambitions to boost his influence.
Potanin has clashed with Deripaska over how Moscow-based Norilsk manages cash and operations. Deripaska wants bigger dividends to help Rusal pay off about $13 billion of debt and a management overhaul, and has offered to buy Potanin’s Norilsk stake.
“Rusal’s debt position remains critical,” UralSib’s Weafer said by telephone from London today. “Potanin expects that the offer of this size will put pressure on Rusal from its creditors to consider it seriously.”
Interros will be ready to make a binding offer to prove its intentions are “serious,” Potanin told reporters Oct. 22. Interros offered to start talks at a $9 billion valuation for Rusal’s stake in Norilsk, more than the $8.5 billion Rusal paid for it in 2008, Potanin said.
Rusal’s investment “is not for sale at any price and is viewed as a critical component of Rusal’s future strategy of diversification,” said Nathaniel Rothschild, chairman of EN+ Group, billionaire Deripaska’s investment company ,which owns 47 percent of Rusal. Potanin’s offer “is derisory,” while EN+ is “open to a merger in the future,” according to a statement distributed by EN+ Oct. 23.
“If Rusal insists that it’s their strategic investment, then I expect a merger offer,” Potanin told reporters in Moscow Oct. 22. “I don’t understand why it’s been more than two years after the purchase, but there is no offer.”
Potanin backs Norilsk Chief Executive Officer Vladimir Strzhalkovsky’s team and wants to curb Rusal’s control. Interros, which won’t seek more than 30 percent of voting interest, Norilsk and the mining company’s pension fund were among investors willing to work together on the buyout, Potanin said.
“Using Norilsk’s balance sheet is effectively a buyback,” and minority investors should have an opportunity to tender their stock, Potanin said, adding that Interros could abstain from tendering shares in these circumstances.
Russian officials have said the government would intervene should the shareholder conflict threaten operations at Norilsk, which is the world’s biggest nickel producer.
“I wouldn’t be surprised if Rusal came back with some counter-offer,” UralSib’s Weafer said. “But the bottom line is: the government will have to decide who will stay.”
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