Shuvalov Backs Mining Merger Deal

VedomostiFrom left, RSPP members Alexander Shokhin, Mikhail Fridman, Potanin and Deripaska at a 2004 meeting with Putin.
First Deputy Prime Minister Igor Shuvalov on Thursday said the government would support a proposed deal between billionaires Vladimir Potanin and Alisher Usmanov aimed at creating a global mining giant.

"The strengthening of Russian companies on the world market and the unification of Russian entrepreneurs' efforts to create and develop such companies is one of the priorities of the Russian economy, and we will support them both in the country and abroad," Shuvalov told reporters Thursday, Interfax reported.

Potanin, who holds 30 percent of Norilsk Nickel through his Interros holding, and Usmanov, who controls half of leading iron-ore producer Metalloinvest, said in a joint statement late Wednesday that they would seek to create a mining giant through a merger of Norilsk and Metalloinvest and planned to jointly invest $60 billion in new projects.

Gallagher Holdings, a company representing Usmanov, said it would seek to buy up 5 percent to 10 percent of Norilsk, while Interros said it planned to acquire a blocking stake of 25 percent plus one share in Metalloinvest.

Potanin and Usmanov invited United Company RusAl, the aluminum giant controlled by Oleg Deripaska, the country's richest man, to join the deal.

Norilsk shares on the RTS rose 2.84 percent to $290 on Thursday.

RusAl, which in April bought 25 percent plus one share of Norilsk, has said it is seeking to merge with Norilsk to form a national metals and mining champion but has so far not supported the idea of a three-way tie-up with Metalloinvest.

Vladimir Zhukov, an analyst at Lehman Brothers, said in a note to investors that the offer to Deripaska was made with a strategic purpose.

"Interros now has offered both a carrot and some sticks to RusAl: an invitation for three-way talks on the one hand, and a threat to use Metalloinvest as a consolidation platform," Zhukov said.

A three-way merger could create a company with a total capitalization of $130 billion to $140 billion, analysts said.

A spokesman for Deripaska said he was traveling and unable to comment Thursday. Requests for comment from senior managers at RusAl and Norilsk were not answered by press time, while a spokeswoman for Metalloinvest declined to comment.

Chris Weafer, chief strategist at UralSib, said the government had likely backed the Potanin-Usmanov deal as a way of keeping Deripaska's growing influence under control. "The prospect of Deripaska getting control of the merged company, and thus becoming the most powerful oligarch in Russia, was unacceptable for the Kremlin," Weafer said, adding that the government wanted instead to see control of a national champion shared among the three oligarchs.

"The Kremlin will now push Deripaska into the merger, which may take months," he said.

Interros said in a statement Wednesday that it would soon ask the Federal Anti-Monopoly Service to approve its agreement with Metalloinvest but was also open for RusAl to join the deal.

Alexei Ulyanov, head of the anti-monopoly service's industry department, said Thursday that the proposed three-way merger would be unprecedented.

"It will be a very important deal, and we will be checking it in all the details," Ulyanov said.