Norilsk May Offer Investors Buyback on Rusal Rejection

Dec. 28 -- OAO GMK Norilsk Nickel’s board may discuss whether to buy back stock from all shareholders tomorrow as a $12 billion bid to acquire United Co. Rusal’s stake in the Russian mining company failed to spark negotiations.

Norilsk may offer the buyback to “neutralize the negative effects” of a shareholder conflict on the company, should Rusal reject its offer by a deadline tomorrow, the Moscow-based company said today on its website. Norilsk said it has accumulated enough cash to either buy Rusal’s 25 percent or minority stakes without external financing.

Norilsk offered Dec. 16 to buy out Rusal’s stake in the company to end a conflict over control of Russia’s largest mining company with billionaire Oleg Deripaska’s Rusal. Two Rusal shareholders, Russian businessmen Mikhail Prokhorov and Viktor Vekselberg, back the bid, Norilsk said in its statement.

Prokhorov’s Onexim Group owns 17 percent stake in Rusal, while SUAL Partners, led by Vekselberg, holds almost 16 percent, according to Bloomberg data. Prokhorov said in a Bloomberg Television interview this month he favored Norilsk’s bid to boost Rusal’s value. Andrei Shtorkh, a spokesman for Vekselberg in Moscow, declined to comment today.

Strategic Asset

"Rusal views a buyback as Norilsk management’s attempt to consolidate shares at the expense of all the company’s shareholders,” the aluminum producer said in a statement today. Rusal said Dec. 22 that its board is studying the offer.

"We are not selling the 25 percent stake in Norilsk,” Elena Rollins, spokesman for Deripaska’s En+ Group, which controls Rusal, said today by phone. “This stake is strategic for us. It’s worth at least $15 billion plus a premium for controlling stake.”

Norilsk “is ready to negotiate potential enhancements of the offer price,” although “full-fledged” negotiations haven’t begun, the Russian mining company said in the statement.

Rusal may not be eligible to participate in a regular buyback because its shares in Norilsk are pledged with state banks for loans, UralSib Capital said last week.