Norilsk Nickel's Buyback Plan May Disadvantage Minorities, Rothschild Says

OAO GMK Norilsk Nickel, Russia’s largest mining company, may disadvantage minority shareholders through a proposed general buyback, said Nathaniel Rothschild, chairman of billionaire Oleg Deripaska’s En+ Group Ltd.

Norilsk said yesterday it may offer the buyback to all shareholders if United Co. Rusal, the world’s largest aluminum producer, reject its at least $12 billion offer to acquire out Rusal’s 25 percent stake in Norilsk.

Billionaire Vladimir Potanin holds almost 30 percent of Norilsk and controls management, is locked in a feud with fellow shareholder and Rusal owner Deripaska over governance and use of the nickel producer’s cash. Norilsk said yesterday that Rusal Chairman Viktor Vekselberg supports the offer made on Dec. 16.

The proposed share repurchase may result in management and Potanin’s Interros Holding Co. consolidating “just less than 50 percent of the voting interest in Norilsk and effective control without the payment of a customary control premium or the right for minority shareholders to exit at a fair price,” Rothschild said today by e-mail.

Erzhena Mintasova, a Moscow-based spokeswoman for Norilsk Nickel declined to comment.

Norilsk said yesterday it won’t be able to propose “such lucrative terms” for Rusal to exit its investment in Norilsk if the aluminum producer rejects the current offer, which runs out today, Norilsk said in turn yesterday in a statement.

Rothschild said the general buyback on top of Norilsk’s Dec. 20 agreement to sell 8 percent held by its own subsidiaries to Trafigura Beheer BV “could result in as much as $1 billion of value destruction.” Norilsk has provided insufficient details on the agreement with Trafigura, an Amsterdam-based commodity trader, he said.

Norilsk may offer to repurchase stock from all shareholders at as much as 15 percent more than the market price, similar to what it offered Rusal, Kommersant reported Dec. 24.