Norilsk stake sale deadline passes, deal hope alive

By Aleksandras Budrys

MOSCOW (BestGrowthStock) – UC RUSAL (0486.HK: ) let the deadline lapse on an offer to sell its Norilsk Nickel (GMKN.MM: ) stake with no announcement on Tuesday, but investors continued to nurse hopes of a deal to end a long-running shareholder row.

RUSAL had until 1200 GMT on Tuesday to agree to sell its 25 percent stake in Norilsk, global leader in nickel and palladium, for an above-market $12 billion until, or risk seeing the miner stage a share buyback which could further cut RUSAL’s influence.

Spokespeople for both RUSAL, the world’s largest aluminum producer, and Norilsk declined to give any information about a meeting of the Norilsk board, which started one hour after the deadline expiry. Norilsk had called a press briefing on Wednesday to discuss the results of the meeting.

Norilsk, the world’s largest nickel and palladium miner has indicated it could raise its offer for the stake, though it did not provide a new figure.

If the bid succeeded, it could mark an end to a long-running feud between Norilsk Nickel’s two core owners, Vladimir Potanin and Oleg Deripaska, who controls RUSAL. Both are at odds over the company’s strategy and dividends.

“The fact that the parties keep silence means that the negotiations are going on. The deal has to be structured, and this will take some time. I hope that the deal will be closed some time in the first quarter of next year,” said Kirill Chuyko, an analyst at UBS.

Two high profile RUSAL shareholders — Mikhail Prokhorov and Viktor Vekselberg — favor selling the stake, Norilsk said in a statement on Monday. Prokhorov told Reuters last week that a price range of $12-15 billion would be fair.

“Given the support… from RUSAL’s main shareholders, we see a high chance that RUSAL will accept a higher offer price, presumably $15 billion,” UralSib analysts said in a note.

“While initially Norilsk may overpay… a potential re-rating of Norilsk shares on the back of the resolution this ongoing shareholder dispute could compensate for this.”

Current market capitalization values RUSAL’s 25 percent stake in Norilsk Nickel at around $10.65 billion, according to Reuters calculations.

If it accepts the deal, RUSAL could in one go pay off its debts, which had threatened to drag down the company during the global economic crisis.

RUSAL shares have added nearly 19 percent since December 16, when Norilsk Nickel announced its offer. At HK$12.1, the stock is now some 12 percent above its January IPO price.

Norilsk Nickel shares have held broadly stable in recent sessions, set to end 2010 with gains of nearly 60 percent thanks to the recovery in global metals prices and outperforming a rise of only 22 percent on the broad MICEX (.MCX: ) index.


If RUSAL decides not to sell the stake, its influence in Norilsk may dwindle as Norilsk Nickel pushes on with a share buyback. The company last week said it would buy back $4.5 billion worth of its shares in two stages.

“The management and Interros, Potanin’s investment vehicle, could assemble up to a 50 percent stake in the company… and ensure full control, albeit with one hostile blocking shareholder (UC RUSAL),” Troika Dialog said.

RUSAL has said it opposes the buyback and has called for an emergency general meeting (EGM) in its second attempt to elect a new board at Norilsk Nickel. On the current 13-strong board, RUSAL has three seats against Interros’s four.

“Once the money is allocated for this (buyback), RUSAL is unlikely to receive any other offer in the medium term,” UralSib said.

(Reporting by Aleksandras Budrys; Additional reporting by Antonina Vorobyova)

Norilsk stake sale deadline passes, deal hope alive