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Rusal Snubs Norilsk $12 Billion Buyback Offer, Has `No Intention' to Sell

OAO GMK Norilsk Nickel, the world’s biggest nickel producer, offered $12 billion to United Co. Rusal to buy back a 25 percent stake held by the aluminum company, as analysts said a deal could benefit both sides.

Norilsk’s institutional investors and shareholders indicated the move would be “the most efficient at the moment,” Norilsk said today in a statement. Moscow-based Rusal, headed by billionaire Oleg Deripaska, rebuffed the approach.

Norilsk’s bid follows a $9 billion offer to Rusal in October from fellow billionaire Vladimir Potanin, who also holds a 25 percent stake. Rusal’s exit would bring an end to a long- running feud in which the two men have bickered over how Norilsk manages its $2.3 billion cash pile and Deripaska has demanded bigger dividends to curb Rusal’s $12 billion of debt.

“This was a natural step from Norilsk Nickel,” Vladimir Zhukov, a Moscow-based analyst at Nomura International Plc, said by telephone. “From Norilsk Nickel’s perspective, it’s a good investment given its excessive cash flows, while for Rusal the amount equals its gross debt and allows it to solve the debt problem in one go.”

Norilsk dropped 1.3 percent to 6,708.17 rubles as of 6:11 p.m. in Moscow, after jumping as much as 1.1 percent following its announcement of the offer. Rusal’s depositary receipts advanced 3.6 percent in Paris.

Monetize Investment

“We do not think Rusal will be inclined to sell right now,” Mikhail Stiskin, an analyst at Moscow-based Troika Dialog, said today in an e-mail. “But the offer highlights that Rusal can now monetize its investment in Norilsk Nickel if it wants to.”

The dispute between Potanin and Deripaska, which dates back to 2008, was reignited in June when an election of Norilsk’s board gave Rusal three seats and Potanin’s Interros Holding Co. four. Deripaska in July also offered to buy out Potanin’s shares and install new management at Norilsk.

“Norilsk Nickel is a strategic investment for Rusal, and we have no intention to sell our stake,” Rusal said today in an e-mail.

Norilsk said it’s lined up banks including JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. to provide financing for a Rusal buyout. The nickel company also said it would cancel as much as 20 percent of its own shares within three years if Rusal agrees to sell, while some of the purchased stock may be used to issue “financial instruments” to reduce its debt.

Decide on Bid

“We think that Rusal has enough time to think about the offer and decide on it,” Maria Uvarova, a Norilsk spokeswoman, said by telephone.

Onexim Group, Rusal’s second-largest shareholder, advised the aluminum company’s board to review Norilsk’s proposal.

“This offer looks much more realistic compared with the previous one,” Dmitry Razumov, chief executive officer of Onexim, said today by e-mail.

Norilsk has offered a “very attractive price,” Nomura’s Zhukov said. “The chance is above zero, in my view.”

To contact the reporter on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net

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