Rusal Investor Prokhorov Breaks With CEO Over Offer for Norilsk

United Co. Rusal investor Mikhail Prokhorov, with a 17 percent share, broke with Chief Executive Officer Oleg Deripaska by urging the world’s biggest aluminum company to consider selling its stake in OAO GMK Norilsk Nickel.

Rusal rejected a $12 billion offer yesterday from Norilsk to buy back the 25 percent shareholding in the world’s largest nickel producer. The shares are “strategic” and not for sale, Rusal said in a statement, following its earlier snub of a $9 billion offer in October from billionaire Vladimir Potanin.

“This offer must be reviewed by Rusal’s board,” Dmitry Razumov, CEO of Prokhorov’s Onexim Group and a Rusal board member, said by e-mail yesterday. “This offer looks much more realistic compared with the previous one.”

Norilsk’s bid is a 15 percent premium to the company’s value of about $10.4 billion on Moscow’s Micex exchange.

Rusal bought its stake in Norilsk from Prokhorov for shares and at least $4.5 billion in cash in 2008. That sparked a feud over management of the nickel company’s $2.3 billion cash pile between Deripaska and Potanin, who also owns 25 percent of Norilsk. Deripaska, Rusal’s main shareholder, demanded bigger dividends to curb the aluminum company’s $12 billion of debt.

Norilsk has lined up banks including JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. to provide funds for its proposed buyout of Rusal. The company also plans to cancel as much as 20 percent of its own shares in three years if Rusal agrees to sell, while some of the purchased stock may be used to issue “financial instruments” to reduce its debt.

Solving Debt Problems

Norilsk’s institutional investors and shareholders have indicated the latest offer would be “the most efficient at the moment,” the nickel producer said in a statement.

“It’s a very attractive price,” Vladimir Zhukov, Moscow- based analyst at Nomura International Plc, said by phone. “From Norilsk’s perspective, it’s a good investment given its excessive cash flows, while for Rusal the amount equals its gross debt and allows it to solve the debt problem in one go.”

Norilsk slid 1.4 percent to 6,703.64 rubles by the close of Moscow trading after the rejection by Rusal, following a gain of 1.1 percent when the offer was announced. Rusal’s depositary receipts advanced 3.6 percent in Paris trading.

Billionaire Deripaska’s En+ Group owns more than 47 percent of Rusal, while Onexim is the second-largest owner.

The third-largest, SUAL Partners led by Rusal Chairman Viktor Vekselberg with about a 16 percent stake, wouldn’t comment on Norilsk’s offer, Andrei Shtorkh, Vekselberg’s spokesman, said by phone from Moscow.