Russian Firms Sign Deal To Create Aluminum Titan

Russian metals companies Rusal Ltd. and Sual Group announced they have signed a three-way merger deal to create the world's biggest aluminum producer, marking a milestone in Russia's drive to create national companies capable of competing with Western rivals on international markets.

The deal -- creating a company with a market value that company officials estimated at $25 billion to $30 billion -- includes the alumina assets of Swiss commodities trader Glencore International AG. The new company, to be called United Company Rusal, will have a combined output of about four million metric tons, or 4.4 million short tons, of aluminum a year, putting it ahead of North American companies Alcoa Inc. and Alcan Inc. in terms of production. In 2005,Alcoa produced 3.55 million metric tons of consolidated primary aluminum, while Alcan's output was 3.42 million metric tons. The bigger company also will be in a better position to compete on deals to buy key raw materials.

The new company will account for more than 12% of global aluminum output.Company officials estimated annual revenue of about $10 billion.

The merged entity will be dominated by tycoon Oleg Deripaska's Rusal, the largest of the three companies, with 2005 revenue of $6.6 billion. Rusal will assume a 66% stake, while Viktor Vekselberg's Sual will take 22%, and Glencore
will have 12%.

Rusal Chief Executive Officer Alexander Bulygin, who will be CEO of the new company, said the merger would add up to big savings. "The synergistic effect will be $3 billion over the next five years, which includes improving cost efficiency," Mr. Bulygin said.

The company's assets would include smelters and refineries across Russia as well as facilities in China, Guyana, Australia, Ireland, Jamaica, Italy and Sweden. The company plans to hold an initial public offering, most likely in
London, within 18 months.

The companies hope the deal will be completed by April 1.

Morgan Stanley and HSBC Holdings PLC advised Rusal on the Glencore leg of the deal. J.P. Morgan Cazenove and UBS AG had been advising Sual on a possible London IPO, which had been considered if the merger didn't go through.