Prokhorov Offers to Sell Stake in Norilsk

Norilsk Nickel's largest shareholders moved a step closer to sealing a key deal Wednesday that could see Vladimir Potanin gain control of the mining giant and end months of speculation over the fate of business partner Mikhail Prokhorov's stake.

Eduard Osipov, a spokesman for Potanin's Interros Group, said Interros made an offer for Prokhorov's stake in Norilsk Nickel in response to an earlier proposal from Prokhorov. He declined to comment on the size of the offer or the stake.

Earlier Wednesday, Onexim Group, Prokhorov's holding company, said in a statement that it had offered to sell 25 percent plus one share in Norilsk, the world's largest nickel and palladium miner, to Potanin for $15.7 billion in cash -- a deal that would hand Potanin control over the company. The offer is based on a price of $293.6 per share with a 12.5 percent premium.

Onexim is also talking to other potential buyers, said Alexei Ryabinkin, a spokesman for the holding.

UralSib metals analyst Kirill Chuiko said the price seemed high, given that the shares closed Wednesday at $283 per share.

Interros declined to comment on the terms of its counteroffer, but general director Andrei Klishas said in a statement that its offer envisioned "a fair market price and regulatory approvals obtained by both parties."

Prokhorov currently holds 28.2 percent directly in Norilsk, while Potanin has a 25.3 percent stake, Norilsk disclosed in a memorandum last week. The fate of Prokhorov's remaining stake, if Potanin's offer is accepted, was not clear, but analysts said it would make little sense for him to retain a minority interest. The bulk of the remaining shares are in free float.

The partners agreed to split their assets last year, but the separation has turned out to be less straightforward than envisioned. Prokhorov, who stepped down as Norilsk's CEO in March, recently bought an additional 3 percent stake on the open market in what appeared to be an attempt to retain some strategic control at the miner.

Under the original plan, Prokhorov said he would focus on Norilsk's energy business, which is due to be spun off from the miner in December, while Potanin would take control of the core business. Norilsk has been one of the strongest performers on the Russian stock markets this year, its share price more than doubling in the year to date.

This has complicated the negotiations for Prokhorov's stake, while media reports have cited Oleg Deripaska's RusAl as a potential rival suitor.

Analysts have speculated that Norilsk might form the basis of a state-backed champion in the metals sector, with RusAl as a major stakeholder.

But UralSib's Chuiko said it was unlikely that RusAl would be able to launch a bid for Potanin's enlarged stake and suggested that a merger between the two companies was more likely.

Chuiko said that if the deal between Potanin and Prokhorov went ahead, it would be difficult for Potanin to finance, even with loans.

"Potanin will need at least $5 billion to $10 billion [of outside funding] to finance this," he said.