Norilsk Surges as Investors Welcome Buyback of Shares

Norilsk Nickel, the world's largest miner of nickel and palladium, jumped in Moscow on a plan to buy back as much as 49 billion rubles ($2 billion) in shares.

Norilsk announced the buyback, at 6,167 rubles per share, late Friday on its web site. RusAl, billionaire Oleg Deripaska's aluminum producer, which owns 25 percent of the mining company, said it opposes the buyback because it doesn't give value to all Norilsk investors.

"This should be positively received, although minority shareholders need to be aware that these actions are not necessarily in their best interests," UralSib analysts Michael Kavanagh and Dmitry Smolin said in a report Monday.

The plan is "a continuation of the conflict between RusAl" and Norilsk's biggest shareholder, Vladimir Potanin.

Norilsk jumped as much as 6.7 percent on the MICEX on Monday. It traded at 4,938.24 rubles, or 1.3 percent higher, at the close, valuing Norilsk at 941 billion rubles ($39.3 billion).

RusAl and Potanin have clashed over Norilsk's strategy and performance, as Deripaska, Russia's richest man, wants RusAl to combine with Norilsk to create a diversified base metals company capable of competing with BHP Billiton. Potanin is seeking a merger with Alisher Usmanov's iron ore miner, Metalloinvest, and also wants Norilsk to acquire producers of uranium and potash.

The buyback should win minority shareholder "cheer" for Potanin against RusAl and will offer support for Norilsk's stock, which has declined 21 percent this year, Troika Dialog analyst Mikhail Stiskin said in a note Monday.

The bought-back shares will be stored as treasury shares, which need to be sold or canceled within a year. Still, Norilsk management loyal to Potanin will be able to "mobilize" the shares when needed, Stiskin said. The shares can be used for mergers, sold to Metalloinvest, or even an offshore subsidiary, thus regaining voting rights, he said.

Norilsk's buyback is planned on a pro-rata basis, equal to about 4.2 percent of shareholders' equity, and the price is 27 percent higher than Norilsk's Friday closing price.