(Bloomberg)--United Co. Rusal, the world’s largest aluminum maker, should sell its 25 percent stake in OAO GMK Norilsk Nickel to offload debt and unlock value, said billionaire shareholder Mikhail Prokhorov.
“As soon as Rusal sells the stake in Norilsk, you’ll have a minimum 50 percent rise” in the market value of the aluminum company, said Prokhorov in an interview on Bloomberg Television today. Rusal, valued at about HK$180 billion ($23 billion) based on prices in Hong Kong today, could rise to as much as $35 billion, according to Prokhorov, who owns a 17 percent stake.
Rusal bought a quarter of Norilsk, the largest nickel and palladium miner, from Prokhorov in 2008 for shares and at least $4.5 billion in cash. The deal sparked a feud over management of Norilsk between Rusal Chief Executive Officer Oleg Deripaska and billionaire Vladimir Potanin, who is the largest shareholder with almost 30 percent stake.
Norilsk on Dec. 16 offered to buy Rusal’s stake in the company for at least $12 billion, a proposal which was discussed by Rusal’s board yesterday. If the aluminum company agrees to its offer, Norilsk could close the deal within three to four months, Potanin’s Interros Holding Co. said in an e-mailed statement today, citing the Russian billionaire.
Norilsk agreed on Dec. 8 to sell its controlling stake in U.S. palladium maker Stillwater Mining Co. for $971 million, and on Dec. 16 its board discussed the sale of its OGK-3 utility for $2 billion. Norilsk also said on Dec. 20 that it agreed to sell 8 percent of its treasury shares to commodities trader Trafigura Beheer BV, which on that day were valued at $3.5 billion.
“These deals may signal Norilsk is accumulating money to buy out Rusal’s stake and will have at least $6.5 billion of available funds to do it, before borrowings,” Olga Okuneva, an analyst at Deutsche Bank AG, said by phone today. A deal could be reached at between $12 billion and $15 billion, Vedomosti reported on Dec. 20, citing Rusal investor Mikhail Prokhorov.
Rusal’s market value is depressed by debt it built up through the purchase of its Norilsk stake, said Prokhorov, who was Potanin’s business partner for 16 years. Rusal had almost $12 billion of debt as of Sept. 30, a regulatory filing shows.
“For the next three to four years there are no dividends for shareholders because Rusal has to repay debt,” Prokhorov said. In the longer-term, Rusal has the potential to triple its value because of the low cost of planned smelters in Siberia and expected rises in aluminum prices, he said.
Rusal gained 0.7 percent to 22.80 euros at 10:21 a.m. in Paris, while Norilsk was 0.1 percent higher at 6,779.90 rubles in Moscow.