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Norilsk Setback May Work in Favor of Buybacks, Lawyers Say

OAO GMK Norilsk Nickel, the world’s largest producer of the metal, may end up having to make an offer to repurchase more shares should an appeal court uphold a ruling against its latest buyback, lawyers say.

A regional court earlier this month ruled that the board of Norilsk had no right to approve the $4.5 billion buyback, on the grounds that it broke the law on foreign investments.

The court said that Norilsk and billionaire Vladimir Potanin’s Interros Holding should be regarded as one shareholder, giving them a combined stake in excess of 30 percent. That may force the company to make a mandatory offer to minority shareholders, according to Dmitry Lobachev, a lawyer at Khrenov & Partners in Moscow.

“Should the court’s decision become effective after an appeal, that would mean Norilsk and Interros passed the 30 percent threshold and may need either to offer a buyback to the minority shareholders or lose the rights to vote 17 percent of stock held by Norilsk and its units,” Lobachev said. “This may create the ground for an offer,” agreed Artur Rokhlin, a partner at Moscow law firm UST.

Potanin has been embroiled in a conflict with United Co. Rusal Chief Executive Officer Oleg Deripaska since 2008. Rusal, the world’s biggest aluminum producer, owns 25 percent of Norilsk and has objected to share buybacks by the company, which have been supported by Potanin.

Should Norilsk’s management lose voting rights for the 17 percent of stock, Rusal may only gain one additional seat on Norilsk’s board, said Kirill Chuyko, co-head of research at BCS Financial Group.

Rusal has rejected three offers since October 2010 to sell out of Norilsk, including an approach of $8.75 billion for a 15 percent stake that was rebuffed in September 2011.

Interros supports Norilsk’s intention to appeal against the original ruling, its press service said by e-mail. Alisa Fialko, a spokeswoman for Norilsk, declined to comment. Rusal’s press office wasn’t immediately available for comment.

Units of Norilsk last year spent $9 billion to buy back 17 percent of its shares.

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