NEW YORK, NY, Jun. 23 -- Norilsk Nickel, Russia's largest mining company, is likely to see major market capitalization decline due to aggressive takeover attempts on the part of RUSAL, the world's largest aluminum producer controlled by Russian magnate Oleg Deripaska, according to the report commissioned by the US shareholders of Norilsk Nickel. The report, released today, studies effects of possible takeover of Norilsk by RUSAL, and states that the company's value is likely to fall because RUSAL, pressured by banks to repay loans, will increase short-term dividend payments and reduce investment.
Billionaire Oleg Deripaska has acquired a 25 percent stake in Norilsk Nickel from his fellow billionaire Mikhail Prokhorov before the 2008 financial crisis. Amid the slump in metals prices that followed and the liquidity crisis in Russia, Deripaska faced a series of margin calls and was forced to request emergency financing from the state banks. Lately, Mr. Deripaska, although still under pressure from banks, increased his stake in Norilsk and stated his intention to join the company's Board and have a hand in running the company.
According to the report prepared for the US shareholders of Norilsk Nickel, Oleg Deripaska's takeover of Norilsk will lead to reduced market capitalization and fall of interest from Western investors.
The report also states that Oleg Deripaska's standard business practices call for asset stripping of companies despite the long-term need to invest in research and development: "Indicative of Deripaska's fondness for cash stripping, he attempted last month to compel the board of Norilsk Nickel to agree to a dividend payout for 2009 of $3 billion. This was despite the reporting of net income for the year of $2.651 billion. The move was defeated by a vote of the company board. Instead, the dividend payout was limited to $1.325 billion, a payout to profit ratio of 50%," states the report.
Analysts agree that RUSAL is likely to deploy "administrative resources" and ties to the Kremlin in the attempt to take over Norilsk Nickel, which would put additional pressure on the company's market valuation. Full report is available for free download from RUXX website, www.ruxxindex.com.
RUXX is the Dow Jones-calculated index and research group which tracks Russian companies traded on Western Exchanges.