Prokhorov Strikes a Deal With RusAl

VedomostiProkhorov and Razumov in June. Under Deripaska's deal, Prokhorov would get 11 percent in United Company RusAl.
Billionaire Mikhail Prokhorov agreed Friday to sell a strategic stake in Norilsk Nickel to Oleg Deripaska's United Company RusAl, pressuring his erstwhile partner to close a deal first.

But the transaction could only happen if Vladimir Potanin, co-owner of Norilsk, failed to take up an earlier offer to buy a one-quarter stake in Norilsk from Prokhorov's Onexim Group for $15.7 billion.

A tie-up between RusAl and Norilsk would be a step toward creating an all-Russian major that could take on acquisitive global titans such as BHP Billiton.

"This strategic transaction paves the way to develop the enlarged RusAl into a global, diversified metals, mining and energy group," RusAl CEO Alexander Bulygin said in a statement. Under the deal RusAl, controlled by Deripaska's Basic Element, would acquire 25 percent plus one share in Norilsk.

Onexim, a $25 billion investment group, would become an 11 percent shareholder in an enlarged RusAl, with the balance to be paid in cash.

RusAl said it had received a commitment letter from ABN AMRO, BNP Paribas, Credit Suisse, and Merrill Lynch to provide a credit facility to finance the cash component of the deal. No details on price were revealed.

Onexim Group CEO Dmitry Razumov said, "The potential combination of RusAl and MMC Norilsk Nickel into a Russian metals and mining giant ... will provide superior value to both companies' shareholders."

Prokhorov owns 28.2 percent of Norilsk and Potanin 25.3 percent. Deripaska owns 66 percent of RusAl; Viktor Vekselberg and associates, 22 percent; and trading house Glencore, 12 percent.

Prokhorov offered the one-quarter stake in Norilsk to Potanin on Wednesday at a price of $293.60 per share plus a 12.5 percent premium but has said he could talk with other parties if Potanin did not accept his terms.

Potanin has 45 days to close a deal. Potanin's Interros holding declined to comment, but he has said a Norilsk-RusAl merger could make sense. "A big company would have more serious capabilities for financing its projects. It would have a big potential for further international mergers and acquisitions," he told the Financial Times in a recent interview.

A unified metals major would probably get a warm welcome in the Kremlin, which is eager for strategic industries to remain under Russian control.

And, with voters due to elect a successor to President Vladimir Putin next March, Russia's industry barons will want to get their house in order in good time. That has proved difficult, however, as Potanin and Prokhorov have struggled all year to separate their business empire, built up during the chaotic 1990s, after falling out with each other.

Sources familiar with the matter said Prokhorov and Deripaska had signed their agreement Tuesday, triggering the Prokhorov offer to sell out to Potanin on Wednesday.

Shares in Norilsk closed nearly 5 percent higher on Friday at 7,085 rubles ($292), valuing the company at $56 billion.