Potanin's Hopes Fade for Norilsk Stake

Itar-TassAn offer by Prokhorov, second left, to RusAl would give him $3 billion less than selling his Norilsk stake to Potanin.
Vladimir Potanin's chances of buying his business partner Mikhail Prokhorov's stake in Norilsk Nickel looked increasingly remote Tuesday, after it emerged that rival bidder RusAl reportedly had been offered the stake for $3 billion less.

Prokhorov has offered to sell RusAl a 25 percent plus one stake in Norilsk, the world's largest nickel and palladium miner, in a cash and share deal valued at $12.7 billion, and a further 4 percent stake that he owns via KM-Invest for $2 billion, Vremya Novostei reported, citing sources familiar with the terms of the deal. Prokhorov would receive an 11 percent stake in RusAl.

Potanin, who holds a 25.3 percent share in Norilsk, has first refusal on the stake.

In mid-November, Prokhorov offered his former business partner Potanin his stake for $15.7 billion -- equivalent to $330 per share -- which factored in a 12.5 percent premium to the offered share price. Potanin had 30 days to accept the terms, and until the end of December to raise the money.

Analysts said they were not surprised that RusAl had agreed to a lower price, as speculation about a deal between the aluminum giant and Norilsk was leaked to the market in early summer, when the miner's share price was about 25 percent lower.

"I don't believe [RusAl and Onexim] would let the rumors spread and then agree on [a deal]," said Alexander Pukhayev, a metals analyst at Deutsche Bank. "They probably agreed on a price earlier in the year."

Analysts said the deal for Potanin looked expensive, and that it might be difficult to gather enough cash to buy the stake. If he were successful, he would theoretically hold more than 50 percent, which may trigger a mandatory takeover bid at the same price to minority shareholders.

The Times of London recently reported that Potanin has approached several Western lenders to raise the money, but he is thought to have received little interest.

Analysts at UralSib said Potanin could be gambling with his money if he went ahead with the deal.

"In our reading of the politics ... the Kremlin ultimately wants to see this deal happen and has basically mandated [Oleg] Deripaska to make it happen," said Michael Kavanagh, metals analyst at UralSib. "In one way or another, both Potanin and Prokhorov will end up selling to RusAl, and most likely not at a premium."

Norilsk shareholders are to vote at a Dec. 14 extraordinary general meeting on the spinoff of the miner's energy assets. After news of the deal with RusAl was announced, Prokhorov signaled that he would vote against the spinoff.

Pukhayev said it made sense for Prokhorov to vote against the spinoff, saying it could be a "deal spoiler" if the assets, which represent a source of cheap energy for RusAl, were separated from Norilsk prior to a potential deal.

Since the beginning of this year, Potanin and Prokhorov have been seeking to divide their assets.