Russians forge $40b aluminium merger deal

RUSSIAN aluminium companies Rusal and Sual are joining forces with the Swiss-based resource group Glencore International in an estimated $US30 billion ($40.4 billion) merger to create the industry's biggest producer. The partners intend to float on the London Stock Exchange.

The deal, which has been under discussion for months, will give Rusal 66 per cent of the new entity, United Company Rusal, while Sual will have 22 per cent. Glencore will get 12 per cent in exchange for its aluminium assets.

The companies had agreed to float United Company Rusal on the London exchange within three years of the deal closing, they said in a joint statement.

Rusal is part of Oleg Deripaska's Basic Elements empire, which recently acquired British van maker LDV, while Sual is controlled by another tycoon, Victor Vekselberg. Glencore, once owned by the controversial commodities trader Marc Rich, is privately controlled.

Brian Gilbertson, president of Sual, will become non-executive chairman of the combined entity. He will be joined on the board by six representatives of Rusal, two from Sual, one from Glencore and two independent directors. Rusal's chief executive, Alexander Bulygin, will also be chief of the joint company.

It is not yet clear whether Mr Gilbertson, a former CEO of Australia's BHP Billiton, still stands to pick up the $US50 million bonus he was mooted to receive as part of the deal. Mr Gilbertson's severance package from BHP was worth more than $12 million, and he also pocketed some £6.5 million ($16.3 million) in shares and cash for helping arrange the merger of BHP with South Africa's Billiton in 2001.

The new company will employ 110,000 people in 17 countries and will have its own bauxite mining, alumina refining and aluminium smelting facilities. It will account for 12.5 per cent of the world's aluminium output, and 16 per cent of alumina (aluminium oxide) production. According to the partners, it will overtake Alcoa and Alcan as the world's largest aluminium company.

Rusal and Sual have been in talks for some time, and the deal has strong political backing, though it is understood Glencore played an important role.

"This transaction is a logical step in our strategy of establishing the world's leading aluminium company," Mr Deripaska said. "It has a compelling industrial logic and delivers significant synergies for further growth."

The companies said they expected the merger would receive the approval of anti-trust regulators in Russia and elsewhere by the beginning of April.

The float "would expand and strengthen Rusal's market-leading position in the global aluminium industry", they said.

They hope to increase machining capacity of the aluminum vacuum furnace chamber responding to the eighth-generation liquid crystal manufacturing equipment on which capital spending has been intensified. The company now holds more than 80% of the large vacuum furnace chambers for the top two liquid crystal manufacturing equipment manufacturers in Japan.