December 30, 2011, 01:52 / Business

UC Rusal and Interros never made peace

UC Rusal three times refused to sell a blocking stake in Norilsk Nickel, despite the wishes of the company’s minority shareholders Alexander Terentyev

Either UC Rusal will be able to convince the majority of shareholders of the advisability of merging Norilsk Nickel with UC Rusal, or it will have to leave Norilsk Nickel,” Interros President Vladimir Potanin said in an interview with Vedomosti. Nickel undertook to help UC Rusal do this Norilsk itself.

"Norilsk Nickel"

mining and metallurgical company. owners - Vladimir Potanin (30%), UC Rusal (25.13%), Corbiere (9.54%), Metalloinvest (3.9%). revenue (IFRS, 1st half of 2011) – $7.3 billion. net profit – $1.8 billion.

The company offered to buy its own shares from UC Rusal, but was refused three times in a year. At the end of December 2010, $13 billion was offered for UC Rusal's blocking stake in Norilsk Nickel, in February - 20% for $12.8 billion and in August - 15% for $8.75 billion. The premium to the market price varied from 20% to 1 ,5 times. “Owning a unique deposit makes Norilsk Nickel the best asset in the industry. It can cost much more if properly managed,” Maxim Sokov, Deputy General Director of UC Rusal, explains the refusals.

Not all shareholders of the aluminum holding agree with this. Onexim of Mikhail Prokhorov and Sual Partners of Viktor Vekselberg and Leonard Blavatnik, who had not seen dividends from UC Rusal since mid-2008, were in favor of the sale. But the main owner of UC Rusal, Oleg Deripaska, and Glencore CEO Ivan Glaisenberg were against it. “Each shareholder of UC Rusal may have his own position on the sale of the stake, and this is normal. One of the reasons could be, for example, the stock ownership horizon,” Sokov points out.

Norilsk Nickel responded to UC Rusal’s refusal to sell by repurchasing its own securities. During the year, he spent $9 billion, collecting 16.94% of the shares (7.4% pledged under the repo transaction), the premium was from 20% to 1.5 times. Buybacks are “a successful global practice for returning money to shareholders along with the payment of dividends,” emphasizes a Norilsk Nickel representative. UC Rusal has a different version (see inset).

UC Rusal also failed at the annual meeting. Despite the fact that the former head of the presidential administration, Alexander Voloshin, joined the board of directors of Norilsk Nickel (a year ago, it was precisely because of Voloshin’s non-election to the board that the conflict resumed), he did not become chairman of the board of directors. This post was taken by Interros Deputy General Director Andrey Bugrov. The election of Bugrov, nominated by independent directors, means for us recognition of Interros’ experience in managing Norilsk Nickel, the representative of the holding emphasizes. This is a clear signal from UC Rusal about who really controls Norilsk Nickel, says Uralsib Capital analyst Dmitry Smolin. UC Rusal has no claims against Bugrov personally, but the chairman of the board must be independent, Sokov notes.

It would have been much more difficult for Potanin to fight with UC Rusal if he had not been supported by the company’s management, which manages the quasi-treasury stake in Norilsk Nickel (currently 9.5%, not counting the pledged 7.4%), points out Smolin. Strzhalkovsky was nominated by Potanin and he works in the interests of Interros, Sokov is sure. “The management is trying to stay out of conflict,” retorts the Norilsk Nickel representative. Too strong management is not the best ally in a shareholder conflict, notes Smolin. Therefore, it is best for Interros to achieve repayment of the quasi-treasury package. This is what he is going to do, sources close to Norilsk Nickel shareholders told Vedomosti. So far, no such decisions have been made, the Norilsk Nickel representative emphasizes.

The conflict between Potanin and Deripaska over control of Norilsk Nickel in 2008 stopped the crisis. Then everyone had to “step over themselves and their ambitions,” Potanin said. UC Rusal has been and is now ready for dialogue on equal terms, Sokov convinces. Something doesn’t seem right, a source close to Interros doubts: “They are talking about a truce, but they themselves are filing lawsuits all over the world.” The Interros representative insists: “We are not at war with anyone.” The crisis could have prompted UC Rusal to think about selling its stake in Norilsk Nickel, Smolin argues: the aluminum company still has a huge debt ($10.9 billion), and aluminum prices are falling. But Deripaska is unlikely to receive such a lucrative offer. Now the blocking stake in Norilsk Nickel costs half as much as the best offer - $12.8 billion for 20%. So for now, the warring shareholders will have to get along together, sums up Smolin.