Roman Abramovich agreed to revised terms including changes to planned dividends in a deal to buy a $1.5 billion stake in OAO GMK Norilsk Nickel from United Co. Rusal, according to three people familiar with the matter.
Norilsk may distribute at least $9 billion in dividends over three years, the people said, asking not to be identified because the plan isn’t public. The figure is down from the $10 billion given last week because Abramovich will buy equities from shareholders instead of treasury stock, the people said.
The deal with the billionaire part-owner of Evraz Plc and Chelsea Football Club aims to resolve a feud between Norilsk’s shareholders. His Millhouse LLC will own 5.87 percent of Norilsk after the biggest supplier of nickel and palladium retires a 17 percent stake in treasury stock, Rusal and billionaire Vladimir Potanin’s Interros Holding Co. said today in a joint statement. Last week’s preliminary deal had Abramovich buying 7.3 percent.
Rusal, controlled by Oleg Deripaska, and Potanin are trying to settle a more than four-year battle over control of Moscow-based Norilsk by balancing their representatives on the board and giving Abramovich voting rights for a 20 percent stake to help quash shareholder disputes, according to the statement.
He will pay $160 a share to Potanin and Rusal, less than the 5,376 rubles ($175) Norilsk closed at yesterday in Moscow. The stock fell 2.1 percent to 5,266 rubles today. Rusal, Interros and Norilsk wouldn’t comment today on the dividends.
Rusal, the world’s biggest aluminum smelter, declined by 1.2 percent to HK$4.82 by the close of Hong Kong trading.
“If Abramovich had bought treasury stock, Norilsk would have had to report losses from its buyback program because it paid $250 to $300 per share last year,” Nikolay Sosnovskiy, a VTB Capital metals analyst, said by phone. That would have cut the dividend Norilsk could pay, Sosnovskiy said.
Norilsk units spent $9 billion buying shares in the parent last year to amass the 17 percent now held as treasury stock.
“The new structure removes the risk to the company and to minorities of a value dilutive sale of the quasi-treasury shares, transferring this risk to the selling shareholders,” Erik Danemar, a Deutsche Bank AG analyst, said in a note.
Rusal will get as much as $620 million from the deal in addition to dividends, helping it service debt, according to Danemar. It faces about $900 million in debt repayments in 2013.
Potanin and Rusal, selling 5.42 million and 3.87 million shares, respectively, will have 30.3 percent and 27.8 percent of Norilsk after the treasury shares are canceled. The two parties and Abramovich will contribute to a 20 percent stake held in escrow, with Millhouse retaining the voting power, according to the statement, down from 22 percent in the earlier agreement. Potanin will replace Vladimir Strzhalkovsky as chief executive officer, as long as the move gets board approval on Dec. 17.
Abramovich will also get one board seat instead of three.
“Abramovich’s entrance into the company reduces Potanin’s influence over Norilsk and makes Rusal an equal partner, ending the long-time shareholder feud,” said Kirill Chuyko, head of equity research at BCS Financial Group in Moscow.
Rusal said last week that all court proceedings related to Norilsk would be halted. A London arbitration court had been scheduled to begin hearing a claim by Rusal that Potanin breached their 2008 shareholder agreement over Norilsk.
The 13-member board will have four directors nominated by Rusal and four by Potanin. The three parties will each appoint one independent director and the minority shareholders may also put forward a board representative, Rusal said. The aluminum producer said conditions to close the deal still need to be met.
“We always were for any agreement between the owners that would guarantee company development and be in the interests of all shareholders,” Alisher Usmanov, whose Metalloinvest holds a 4 percent stake in Norilsk, said in an e-mail. Metalloinvest hasn’t seen the details of the agreement, Usmanov said.
Abramovich is a former business partner of Deripaska. The two pooled aluminum smelters to form Russian Aluminum in 2000. Abramovich later sold his half to Deripaska, who created Rusal through a three-way merger in 2006 with Sual Group and the alumina assets of what was then Glencore International AG.