Bloomberg News

Norilsk Owners Said to Head Into $1 Billion Arbitration

November 30, 2012

Russian billionaire Vladimir Potanin and Oleg Deripaska’s United Co. Rusal are heading toward a more than $1 billion arbitration case as they battle over rights at OAO GMK Norilsk Nickel (MNOD), according to four people with knowledge of talks.

Potanin and Deripaska are negotiating the terms of a new shareholder agreement and success may spur Rusal to withdraw its claim that the previous accord was breached, the people said, asking not to be identified because the issue is private. Hearings by a London panel open Dec. 3, they said.

The billionaires have been fighting over the world’s largest nickel producer since Rusal bought its 25 percent stake from Potanin’s former business partner, Mikhail Prokhorov. Rusal sought arbitration in 2010, saying Potanin violated its rights to board representation, a claim he has denied.

“Arbitration may delay a shareholder agreement as the parties may want to see what the outcome may be, but still the settlement is likely to be reached,” said Kirill Chuyko, head of equity research at BCS Financial Group in Moscow.

The aluminum producer is demanding more than $1 billion in compensation from Potanin’s Interros group, which controls 28 percent of the nickel mining company, for damages after Norilsk’s share price declined, the people said.

The press services of Rusal, Potanin’s Interros and Norilsk declined to comment on the process, saying it’s not public.

Shareholder Will

The start of arbitration won’t bar Interros and Rusal from continuing discussions on a new shareholder agreement, said Alexander Nadmitov, co-managing partner at Nadmitov, Ivanov & Partners Law Firm LLC, which is not involved in the planned hearings. It depends on their own will, he said.

Norilsk shares rose 2.4 percent to 4,823 rubles in Moscow, the biggest gain since Sept. 14.

As part of the new agreement, Potanin may replace Vladimir Strzhalkovsky as chief executive officer at Norilsk, people said Nov. 25. The talks include raising Norilsk’s dividends to at least 50 percent of net income, they said. Billionaire Roman Abramovich may become a Norilsk shareholder, buying 6.9 percent of the treasury stock, to reduce conflicts over control, they said this week. His spokesman, John Mann, declined to comment.

The presence of Abramovich as a third party in the agreement between Deripaska and Potanin may help ensure that it lasts longer than the previous accord, Nikolay Sosnovskiy, a VTB Capital analyst in Moscow, said in a Nov. 27 note to clients.

Potanin and Deripaska resumed discussions last month after a break since June.

A sale of Rusal’s stake in Norilsk isn’t under discussion, the people said last month. Deripaska’s company has rejected three offers to sell out of Norilsk since October 2010, rebuffing an approach of $8.75 billion for 15 percent in September 2011.

“We see the shareholders reaching an agreement by the end of this year,” said Dmitriy Kolomytsyn, an analyst at Morgan Stanley in Moscow.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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