The conflict in MMC “Norilsk Nickel” is about to enter the acute phase again. Rusal by Oleg Deripaska is again convening a meeting of shareholders to change the board of directors. Management of Norilsk Nickel, acting in alliance with Interros, is preparing to buy shares in the MMC at $ 4.5 billion as a whole. Rusal considers buyback an attempt of the management to consolidate papers in its hands at the expense of all shareholders of Norilsk Nickel.
Rusal sent to Nornikel (Rusal owns 25% of shares) a requirement to convene a second special meeting of shareholders for re-election the Board of Directors of MMC (the first was on Oct. 21 also at the request of Rusal, the council has been kept in its previous composition). Rusal is concerned about the sale of more than 8% quasi fiscal shares by Norilsk Nickel worth of $ 3.5 billion to the Swiss trader Trafigura without the approval of the deal by the board of directors.
Rusal (three seats on the board) proposes that the shares have been implemented in favor of a structure which is "friendly" to the MMC or Interros (which owns 25% stake in Norilsk Nickel and acts in an alliance with its management in general 7 of the 13 seats on the board of directors in the conflict of shareholders of the company). "It is clear that the management of Norilsk Nickel began to consolidate stake in MMC ... in anticipation of the annual shareholders meeting in June 2011 to ensure the required number of members at the election of the board of directors of MMC – those should be representatives from the management in order to block the change of the general director of the company (Vladimir Strzhalkovsky, Kommersant)", Rusal reported.
Rusal is also feared that the "management" Norilsk Nickel "may declare additional redemption of its shares by the subsidiaries of MMC for cash of all shareholders, but it should be in the interests of management with the use of veiled statements of aspiration to increase the value of the company."
In response Nornikel accused Rusal of deliberately disrupting the adoption of important decisions by the board of directors of the company. "We are talking about the budget for 2011, the long-term production strategy, as well as options for the program to increase the capitalization of the company," as it was said in a statement.
Also, MMC believes that "Rusal" is "probably" trying to "bargain for the highest possible award for the sale of its 25-per cent stake in MMC (Nornikel sent an offer to Rusal on December 16, proposing $ 12 billion for the stake). "In this situation, Rusal is likely to use the classic tools of corporate blackmail to either takeover or sale the shares at inflated prices," they added in Norilsk Nickel.
However, fears of "Rusal" were totally groundless. The Board of Norilsk Nickel indded approved the program improving the capitalization of MMC yesterday, a source close to the company said. It consists of two stages. In the first stage, Norilsk plans to buy back shares worth up to $ 3 billion with a premium to the market price of 10-15% (i.e. under the same conditions as the redemption of a package of "Rusal"). Thus, the MMC can buy about 7% of its shares. Paper will be bought by off-shore subsidiaries of MMC, in order ADR holders could participate in a buy back. In the second stage within six months, MMC intends to buy from the market its own shares for another $ 1.5 billion. Respectively, they will spend $ 4.5 billion on the program of capitalization improvement. Derivative instruments may be issued on the part of the securities to enhance liquidity of Norilsk Nickel.
Norilsk Nickel has already conducted buy back of shares - both from the market, and in the form of buy back. They bought about 8% of the shares as a whole at $ 3-3.5 billion. At the beginning of the 2008 crisis 58% of shareholders wanted to participate in buy back, but the board of directors decided to buy only 4% with a coefficient of 0.07. Excitement around the buy back was due to the fact it was held at $ 223 while the current price was $ 72 per share (stocks fell down along with the market during the crisis).
Source: Kommersant № 239 (4539) on 12/24/2010