Oligarchs, not investors, to get Abramovich Norilsk windfall – by Polina Devitt (Reuters U.K. – December 11, 2012)


MOSCOW – (Reuters) – Roman Abramovich, the Kremlin’s enforcer on a peace deal at Norilsk Nickel, will pay cash straight to the Arctic giant’s two main oligarch owners for a stake in the company, depriving other investors of the windfall from an end a billionaires’ feud.

Norilsk Nickel, which mines the vast mineral deposits of Russia’s far north, was one of the biggest prizes handed to insiders in the post-Soviet carve-up of Russian industry that created a clique of politically powerful tycoons.

For years the world’s largest nickel and palladium producer has suffered from a feud between its two main owners, billionaires Vladimir Potanin and Oleg Deripaska.

Fellow billionaire Abramovich, owner of London’s Chelsea football club, settled the row last week by sweeping in to buy a stake under a deal that appeared to have the blessing of President Vladimir Putin.

A revision, announced on Tuesday by Norilsk and Deripaska’s Hong Kong-listed aluminum producer RUSAL (0486.HK), would see Abramovich buy a slightly smaller stake, but pay for it directly to the two billionaires’ firms, rather than Norilsk.

Analysts said that means the cash windfall injected by Abramovich’s Millhouse holding company would bypass Norilsk’s minority investors, and probably force Norilsk to borrow to fulfill promises to increase its dividends.

“This means that Norilsk Nickel (as well as its minorities) will not receive any cash from Millhouse Capital’s arrival as minority shareholder,” J.P. Morgan Cazenove said in research.

Under the original deal, Abramovich was to buy a 7.3 percent stake in Norilsk from the company itself for $2 billion, and also be given voting power over some of Deripaska’s and Potanin’s shares, representing a total of 22 percent. The revision would see Abramovich buy a 5.86 percent stake for $1.5 billion and be given voting control over about 20 percent.

Alexander Abramov, Abramovich’s partner in Evraz (EVRE.L), Russia’s largest steelmaker, could become the new board chairman at Norilsk Nickel, a source close to one of shareholders said.

Norilsk’s minority shareholders have spent the last four years caught in the quarrel between Potanin and Deripaska, who resisted pressure from his own shareholders to sell RUSAL’s stake in Norilsk to pay off debt, and instead campaigned for management changes and dividends from the Arctic giant.

The revision, likely to have been blessed by the Kremlin, appears to be a win for Deripaska, whose aluminum company, with $10.7 billion in debt, is struggling with weak aluminum markets and has called for production cuts to boost prices.

For the rest of this article, please go to the Reuters U.K. website: http://uk.reuters.com/article/2012/12/11/us-rusal-norilsk-abramovich-idUKBRE8BA0PK20121211