Norilsk Board Survives Prokhorov's Assault

Norilsk Nickel's shareholders voted to retain the company's current board of directors Tuesday, striking a further blow to the chances that Oleg Deripaska's United Company RusAl will succeed in acquiring Mikhail Prokhorov's blocking stake in the firm.

Prokhorov's Onexim Group had called the extraordinary general meeting to consider proposals to change Norilsk's voting charter and its board of directors, including the election of three representatives from RusAl to the board.

"Our shareholders clearly expressed their opinion regarding the professionalism and outstanding service by the board of directors in voting against the early termination of the powers of the members of the board," Norilsk CEO Denis Morozov said.

Sixty-four percent of participating shareholders voted against changing the board of directors, while 34.5 percent voted in favor of the motion, Andrei Klishas, Norilsk chairman and the former head of Vladimir Potanin's Interros Group, the other main shareholder, said after the meeting.

Onexim Group voted to change the board, said Morozov.

"It's good news for Norilsk. It would have been bad news if RusAl had got on the board," said Vladimir Zhukov, an analyst at Lehman Brothers. "This all points to a reduced probability of a deal between RusAl and Prokhorov."

Earlier in the day, executives from Norilsk, the world's largest nickel and palladium miner, gathered for a conference devoted to the industry as a whole.

But all the talk was of the looming shareholders' meeting, which many saw as a key test for RusAl's Norilsk bid and potential takeover. Norilsk's Morozov made a brief appearance at the conference before dashing off to the meeting.

RusAl wants to close the deal on the acquisition of Prokhorov's blocking stake of 25 percent plus one share in Norilsk by the end of April, in a cash-and-equity deal estimated to be worth $12.7 billion.

The deal, which RusAl hopes will be the first step in a full merger to create a $100 billion mining giant, took a surprise turn early this week after reports that Prokhorov had objected to certain terms offered by RusAl regarding the early repayment of a $4.5 billion loan to foreign banks, putting the future of the deal in doubt.

Potanin and Prokhorov, who created one of Russia's most successful business partnerships in the 1990s, spanning metals, banking and media, have been in the process of a protracted and public business divorce since early last year.

KM-Invest holding, which owns an 8 percent stake in Norilsk on behalf of the two businessmen, said earlier that it would vote with the management at Tuesday's meeting, an initial sign of a thaw in relations between the two main shareholders.

"The level of mutual understanding between Potanin and Prokhorov has increased recently," Klishas said after the meeting.

Earlier this year, Alisher Usmanov's Metalloinvest proposed a merger with Norilsk, a move many interpreted as an effort by Potanin to secure support to fend off a takeover by RusAl.

Analysts have expressed concern that Norilsk's minority shareholders would suffer in a potential tie-up with RusAl, saying the reported valuations for the possible deal overvalued RusAl and undervalued Norilsk.

Klishas, who is also the head of KM-Invest, told journalists that Interros might consider bidding for Prokhorov's stake, were the RusAl deal to fall apart. Potanin was offered Prokhorov's stake for $15.7 billion late last year but did not exercise the option on terms Interros said were unrealistic.

"If Prokhorov produces a document confirming that his relationship with RusAl is over, we will examine this issue," he said.

Klishas added that Norilsk could agree on the terms of a tie-up with Metalloinvest "within weeks." Work on such a deal is proceeding faster than expected, but there are still details to be hammered out on valuations and the structure of the proposed combination, he said.

Nadia Popova contributed to this report.