Oleg Deripaska's United Co. Rusal said it will seek to combine with OAO GMK Norilsk Nickel (GMKN), Russia's biggest mining company and valued at $53 billion, in the next year and may buy shares on the open market.
A merger is ``in the interests of all shareholders,'' Rusal Chief Executive Officer Alexander Bulygin said in e-mailed answers to questions today. ``If the combination completes within a year, in 10 years we can become the leader in metals and mining, producing all the metals traded'' on the London Metal Exchange, he said.
Rusal, the world's largest aluminum producer, yesterday bought 25 percent of Norilsk from Onexim Group, an investment company controlled by billionaire Mikhail Prokhorov. The aluminum maker wants to merge with Norilsk to challenge the world's biggest diversified mining company, BHP Billiton Ltd. (BHP)
Prokhorov's Onexim received 14 percent of Rusal in return for the shares it sold in Norilsk. His investment company also got $7 billion in cash from the sale, the newspaper Kommersant said today, citing unidentified bankers familiar with the transaction.
Closely held Rusal may seek to raise its stake in Norilsk by buying shares on the market if conditions are favorable, Bulygin said.
``If not, increasing the stake is not a must,'' he said. ``We will review different ways to merge, discussing it with Norilsk shareholders large and small.''
Vladimir Potanin holds about 30 percent of Norilsk and is the company's largest investor. Rusal said it plans to meet with Potanin's Interros Holding Co. to discuss managing Norilsk.
Norilsk rose 74.6 rubles or 1.1 percent, to 6,651.97 rubles ($280) at 5:50 p.m. in Moscow trading. The shares fell 3.1 percent yesterday after Rusal announced the stake purchase.
Deripaska, ranked by Forbes magazine as Russia's richest man, is the controlling shareholder in Rusal. The company may be worth $35 billion, Lehman Brothers Holdings Inc. said in a March report. A combination of Rusal and Norilsk would create a company with a market capitalization of $90.5 billion, potentially rising to $110 billion in a year, Lehman said.
Uniting Rusal and Norilsk is a ``target,'' while ``it is still an open question'' which company would act as an acquirer, Bulygin said. ``This is a technical question, which is not important for us.''
Rusal, formed last March in a merger between OAO Russian Aluminum, Sual Group and the alumina assets of Glencore International AG, has a ``unique experience in unifying three companies,'' Bulygin said. ``We are consolidators.''
Separately, Norilsk began talks with OAO Metalloinvest on a possible combination. Metalloinvest, controlled by billionaire Alisher Usmanov, is Russia's largest iron ore producer.
Bulygin said Rusal won't take an ``aggressive'' position to block a deal with Metalloinvest.
``We will, of course, be interested in hearing the details,'' he said. ``In any deal, the most important thing is to increase the value of the company, not use it for defensive measures.''
Rusal doesn't want to ``spoil relations'' with global funds that hold stakes in Norilsk as the aluminum company itself plans to sell shares next year, Bulygin said.
``The financial markets will calm down by then and the price of aluminum will rise to $4,000 a ton at the very least,'' he said. Aluminum for delivery in three months dropped 0.6 percent to $2,986 a metric ton as of 4:27 p.m. on the LME.
Metalloinvest said yesterday it will continue to pursue merger talks with Norilsk.
To contact the reporters on this story: Yuriy Humber in Moscow at firstname.lastname@example.org
To contact the editor responsible for this story: Simon Casey at email@example.com