Divorce like a man

Vladimir Potanin and Mikhail Prokhorov divide assets

Interros co-owners Vladimir Potanin and Mikhail Prokhorov are breaking up and dividing the business. By the end of this year, the partners intend to restructure it. “The Interros management company,” the company said in a statement, “will remain the property of Vladimir Potanin, and Mikhail Prokhorov will leave its shareholders and create his own management company.” So far, as sources close to Interros say, such a company has not been created. At the same time, the main asset of the group - MMC Norilsk Nickel - will remain under the control of Mr. Potanin. The shares of Norilsk Nickel will be purchased by him from his former partner and will remain under the control of Interros.

Alliance Messrs. Potanin and Prokhorov is one of the oldest in Russian business and has always been considered the strongest. And even when other large business partners began to divide assets, a “divorce” of the Interros owners looked unlikely. And yet it took place. The Interros press release quotes Vladimir Potanin as saying: “We have been discussing the need for this step for several months.” Which is quite possible, although it is obvious that the January incident with Mikhail Prokhorov could have been the impetus for the “divorce” of long-time partners. As is known, the head of Norilsk Nickel was detained by French police along with a group of Russian tourists, including several girls, during an inspection of a hotel in the French winter resort of Courchevel, where they lived, and was interrogated by a prosecutor for several hours. Although no charges were ultimately brought, a shadow fell on the reputation of not only Interros, but also Russian business.

As they say, Mikhail Prokhorov set foot on Russian soil with the words: “Sarkozy (French Minister of Internal Affairs and presidential candidate - Ed. ) owes me!” It is not known whether France will repay its “debts” to Mr. Prokhorov, but it recognized the merits of Vladimir Potanin. The day before yesterday, the French Minister of Culture and Communication, Renaud Donnedier de Vabre, presented him with the Order of Arts and Fine Letters in Paris. The award was given for promoting the exhibition “Paris - St. Petersburg, 1800-1830. When Russia spoke French." Mr. Potanin expressed the opinion at the ceremony that awarding any Russian citizen “contributes to the prestige of the country as a whole.”

The balance of damage and prestige caused by Messrs. Prokhorov and Potanin, will take shape over time. But the scheme for dividing assets indicates that the general director of Norilsk Nickel is stepping aside and receiving generous compensation for this.

Now the share of each of the beneficiaries in Norilsk Nickel is 27.4%. If the shares are bought back at the market price (and sources assure that this will be the case), then Mr. Prokhorov’s entire stake in Norilsk Nickel, based on the company’s current capitalization, should be worth $8.7 billion. The truth, obviously, is finite the amount that Mr. Prokhorov will receive for his share in Norilsk Nickel will take into account the difference in the value of the company and those assets that will be separated from the Interros group and transferred to the management company he creates. These will be energy and hydrogen assets consolidated by the group. The main and most expensive among them is a stake in RAO UES of Russia. According to an informed source from Vremya Novostey, the holding now controls 3.7% of the shares of the energy monopoly, which, according to the current capitalization, is worth almost $1.8 billion. In addition, Interros owns various shares in a number of TGKs, OGKs, hydroelectric power plants, as well as 35 -percentage share in the American Plug Power Inc, which develops and produces equipment for hydrogen energy.

Shares of the remaining assets of Interros - Rosbank, Power Machines, gold mining Polyus, Prof-Media, the Open Investments investment fund and others - “will be divided between Vladimir Potanin and Mikhail Prokhorov on a parity basis and the corresponding shares transferred to the management of the relevant management companies,” the company said in a statement.

Mikhail Prokhorov will leave the board of directors of Norilsk Nickel, and Mr. Potanin will take his place. But he will retain the post of General Director of MMC, which Mr. Prokhorov has held since 2001, and will leave it only “after completing a number of projects in the company.” As Sergei Chernitsyn, head of the MMC public relations department, told Vremya Novostey, “Mikhail Prokhorov will work as the company’s general director at least until the end of this year.” For other comments, he advised contacting Interros. Interros refused to give additional comments to the message about the division of the business by its main owners: “Everything we wanted to say is set out in our message.”

The message, for example, contains comments on the announced process by its participants themselves. Vladimir Potanin: “Interros has extensive experience in successful restructurings. We discussed the need for this step for several months. It is obvious that in order to fully realize the investment potential we have accumulated, a new degree of freedom in making management decisions is necessary. I am confident that the new asset management model will contribute to the growth of capitalization of each of our businesses and the emergence of new partner projects.”

Mikhail Prokhorov explains the division of property with his new hobby: “In recent years, new, extremely promising areas in the field of traditional and alternative energy have appeared in the Interros business. Investments of this kind require significant intellectual and financial investments. I intend to seriously engage in this promising area; I believe that hydrogen technologies will allow Russia to create an innovative economy.”

Considering that Mr. Prokhorov has not even come up with a name for his future management company, the division of property does not look all that prepared. Although they started talking about the possibility of such a scenario a year ago. At that time, the market was actively agitated by rumors about the possibility of purchasing Norilsk Nickel, the main asset of Interros, by the state monopoly ALROSA. It was assumed that both mining companies would come under state control . The fact of the negotiations themselves was confirmed then by the former head of Norilsk Nickel, and now the governor of the Krasnoyarsk Territory, Alexander Khloponin. However, no deal ever took place. Information came from various sources that Messrs. Potanin and Prokhorov had disagreements regarding the future of their main asset: the head of Norilsk Nickel categorically refused to “give up.”

The partners themselves then called everything that was happening empty rumors and stated that they did not intend to separate yet. In March last year, in an interview with Russian Forbes magazine, Mr. Prokhorov stated that he was not going to leave Norilsk Nickel and saw in Norilsk a wealth of work for himself, which would last for at least four years. “I didn’t think it would be so interesting,” the publication quotes Mr. Prokhorov, adding on his own: “...The billionaire, who appears in gossip columns almost more often, speaks about the Arctic either jokingly or seriously than in business news. Norilsk and its surroundings, cut off from the main territory of Russia by permafrost, impenetrable taiga and thousands of kilometers of distance, Prokhorov lovingly calls “a small country,” which, according to him, is no less dear to him than the mountainous Courchevel and the Cote d'Azur.” The magazine's commentary, published ten months ago, appears to be prophetic. However, sources close to Interros, of course, assure that the decision to separate the businesses was made just a year ago and is in no way connected with the events in Courchevel.

Be that as it may, now the fate of Interros' assets is again becoming a reason for thought and speculation. The partners, acquiring assets in a variety of areas, never hid the fact that they acted as financial investors. And first of all, they count on an increase in the capitalization of their assets, which implied further “monetization.”

Perhaps two truly core businesses became theirs: banking and metallurgy. Norilsk Nickel, which at that time was the Russian Joint-Stock Company for the Production of Non-Ferrous Metals, actually came under the control of Potanin-Prokhorov’s structures in 1995, when, as a result of a loans-for-shares auction, ONEXIMbank received nominal holding of the company’s state stake - 38% of the total or 51% of voting shares. Two years later, these shares came under the direct control of the group. The package cost the partners $270 million.

In 2000, the restructuring of RAO Norilsk Nickel began, as a result of which the core of the company became the Mining and Metallurgical Company of the same name, which had previously been a subsidiary of RAO. Cross-ownership of shares in companies was abolished, level 1 ADRs were issued for 15% of the shares of RAO Norilsk Nickel, which during the restructuring process were automatically re-registered as shares of OJSC MMC Norilsk Nickel. At the beginning of 2002, the company's authorized capital was reduced , and as a result, a share ownership scheme emerged in which Potanin and Prokhorov divided the controlling stake in MMC on a parity basis.

Some market participants remain confident that the transformation of Interros' business announced yesterday is the beginning of the active phase of preparing MMC for sale to the state. This can be confirmed by the fact that Norilsk Nickel in its current form is largely due to Mikhail Prokhorov, who has been involved in the direct management of the company for five years, rather than to his partner.

Banking business Potanin and Prokhorov did not collapse in 1998, but the partners decided to reformat it: Rosbank was created on the basis of ONEXIM and IFC. Later, the remnants of the banking empire of Alexander Smolensky were successfully integrated into it, and recently a strategic foreign investor was attracted to Rosbank - the French financial group Societe Generale. Currently, Interros's share in Rosbank's capital is now 77%, another 20% minus one share belongs to Societe Generale. The group bought this stake last year for $634 million. At the same time, the French entered into an agreement with Interros, according to which by the end of 2008 they could buy another 30% plus 2 shares for $1.7 billion. Thus, the controlling The bank's stake was valued at $2.3 billion. So far this is the highest estimate for a Russian bank. The remaining 3% of shares belong to Rosbank's top managers.

As Interros explained to Vremya Novostey, the restructuring of the holding will not affect the current business of the bank or the agreements with the French shareholder. “If Societe Generale exercises its option before the end of this year, then the remaining shares of Rosbank will be divided between Messrs. Prokhorov and Potanin. If later, then first the shares of Rosbank will be divided between the current owners of Interros. Mr. Potanin’s shares will remain in Interros, and Mr. Prokhorov’s share will be transferred to the management of the company that he creates,” our interlocutor said. It is noteworthy that last year, when considering options for cooperation, Interros and Societe Generale did not rule out the option of paying a third of Rosbank with shares of the French group. This means that both Prokhorov and Potanin, despite the current division of property, may become shareholders of the French group.

However, what bothers observers in this section is primarily the disparity in the value of the businesses that the partners will ultimately receive. If Mr. Prokhorov manages to get money for his stake in Norilsk Nickel at market prices, he will become the owner of colossal free capital. However, analysts are somewhat confused by the question of where Mr. Potanin will be able to attract such a huge amount of funds in a fairly short time. Some interlocutors of Vremya Novostey working in the market suggested that these funds could be raised against the security of Mr. Potanin’s own shares.

But in general, the market reacted positively to the news about the division of business by Potanin and Prokhorov. On world stock exchanges where Norilsk Nickel shares are traded, they rose by 1.5-2.5% yesterday. On the RTS, shares rose 1.85% to $165.5.

“The exit of one of the shareholders from the business is usually not perceived very positively by investors,” says Dmitry Parfenov, head of the analytical department of Prospect Investment Group. - But here the situation is just different, since there is a difference of interests and wide diversification of business. The explanation that the exit of one of the partners is necessary from the point of view of the development of other areas seems normal.” ATON expert Vladimir Katunin agrees with this: “Initially they started a business as a couple, but now, obviously, everyone wants to have their own business. It probably seems to Prokhorov that he is leaving the MMC at a favorable time, when nickel is expensive and the company is expensive.”

Anna LANDER, Andrey DENISOV, Natalia ROMANOVA