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Rusal Files for Arbitration on Dispute Over Norilsk

Oleg Deripaska, chief executive officer of United Co. Rusal. Photographer: Timothy O'Rourke/Bloomberg
Oleg Deripaska, chief executive officer of United Co. Rusal. Photographer: Timothy O'Rourke/Bloomberg

Aug. 11 (Bloomberg) -- United Co. Rusal, battling with billionaire Vladimir Potanin’s Interros Holding Co. for control of Russia’s largest mining company, said it filed a request for arbitration over the dispute.

The London Court of International Arbitration hasn’t set a date for a hearing on the OAO GMK Norilsk Nickel row, Moscow-based Rusal, controlled by billionaire Oleg Deripaska, said today in a statement to the Hong Kong stock exchange.

Deripaska and Potanin, both with a quarter of the world’s biggest nickel supplier, offered to buy each other out after disagreeing on dividend payments and investment plans. Rusal is seeking arbitration after winning one less board seat than Interros in a June election it says was manipulated. Norilsk independent directors Gerard Holden and Brad Mills support Rusal’s request for an external investigation into the vote.

“The company seeks the speedy determination of this dispute in order that the parties’ rights and obligations are established,” Rusal said. The filing was made Aug. 10 against Interros International Investments Ltd., the company said.

Norilsk fell 1.5 percent to 5,080 rubles by 2:20 p.m. in Moscow. Rusal, the world’s largest aluminum supplier, fell 2.2 percent to HK$8.31 in Hong Kong trading. The company, which raised $2.24 billion in its Hong Kong initial public offering this year, wants dividend payments from Norilsk to cut debt.

Breach Agreement

“We are surprised that Rusal, instead of going through the conciliation committee created by the Norilsk board, decided to go to court,” Interros spokesman Andrei Kirpichnikov said by phone in Moscow. “Still, turning the matter over to judicial courts has to be better than throwing jibes in the media.”

Interros breached a 2008 agreement by failing to vote to ensure the election of four directors nominated by Rusal at Norilsk’s annual general meeting on June 28 and secure Alexander Voloshin as a director and chairman, Rusal said today.

Rusal sent a letter to Norilsk this month requesting an extraordinary general meeting to elect a new board. The aluminum producer said it aims to boost the number of independent board members at Norilsk, and wants the nickel miner to sell its stake in Stillwater Mining Co., cut spending on non-mining operations and lower equipment and raw material costs.

Norilsk’s board meets today to discuss the EGM proposal.

Holden and Mills wrote in an Aug. 9 letter to Norilsk Chairman Vasily Titov that Interros should have three board representatives, the same number as Rusal, instead of four, and there should be four independent directors, an increase by one.

Share Buyback

Deripaska in July said he’s concerned Interros has enough influence on Norilsk’s board to approve a share buyback that wouldn’t be in the interest of all shareholders.

The billionaire opposes a buyback and said that during talks with Interros in April he sought a dividend payout by Norilsk to shareholders of $3 billion for last year.

Norilsk’s board approved $1.33 billion of dividends.

Rusal had previously sought to combine with Norilsk. Deripaska and Potanin agreed in November 2008 to put merger plans on hold for three years. A Norilsk official declined to comment today on the disagreement between the shareholders.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Yuriy Humber in Moscow at yhumber@bloomberg.net

To contact the editors responsible for this story: Hwee Ann Tan at hatan@bloomberg.net; Amanda Jordan in London at ajordan11@bloomberg.net

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