The Wall Street Journal-20080205-Norilsk Takes Steps to Thwart Takeover by Rusal
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Norilsk Takes Steps to Thwart Takeover by Rusal
Full Text (582 words)MOSCOW -- Russia's OAO Norilsk Nickel adopted defensive measures aimed at thwarting a $51 billion takeover attempt by United Co. Rusal as a battle for control of the world's largest nickel producer intensified.
Rusal has said it wants to combine with Norilsk to create a Russian metals giant that could compete with rapidly consolidating global players such as BHP Billiton. A merged Rusal-Norilsk would be among the world's top five miners by market capitalization. Rusal is buying a stake of between 25% and 29% in Norilsk, a move it has cast as the first step toward such a merger.
But the management of Norilsk and one of its largest shareholders, Vladimir Potanin, have adopted a defensive stance to Rusal's approach.
"We do not feel threatened, but maybe we do feel cautious," said Norilsk Chief Executive Denis Morozov. "The situation will be a good test of whether protection mechanisms in Russia work."
With a modern corporate history of fewer than two decades, Russia hasn't had many takeover battles. A Rusal-Norilsk battle would be by far the biggest and could signal a new phase in Russia's maturing marketplace.
But analysts say it isn't clear whether the conflict will turn into a genuine takeover battle or whether Mr. Potanin is playing hardball in order to cash out at a better price. Norilsk stock rose almost 7% in Moscow yesterday after its board adopted the defensive measures.
"Potanin is not just juggling for control of Norilsk but for control of the merger process," said Marat Gabitov, an associate at Moscow brokerage house UniCredit Aton. "He's after control of the valuation of his stake and control of his role in the future merged company."
He added he thought the merger would happen eventually because rapid consolidation in the sector globally is leaving smaller players vulnerable.
Rusal board chairman Viktor Vekselberg told the Russian media last month Mr. Potanin had agreed in principle to the merger. Norilsk declined to comment on Mr. Potanin's stance yesterday. A spokesman for Mr. Potanin couldn't be reached.
Norilsk's board tried to complicate the takeover yesterday, considering or adopting measures that would make it harder for Rusal by reducing the number of shares available on the open market, selling assets Rusal wants and devising ways to raise cash for a robust defense.
The board ordered management to study the possibility of a share buyback. The board also authorized the sale of energy assets valued at about $7 billion and said it will seek an additional listing on the London Stock Exchange this year. It also urged shareholders to vote against Rusal-backed changes to the board at an extraordinary general meeting in April.
Mr. Morozov and other top managers are to meet with minority shareholders in London, New York and other cities in the weeks ahead to make their case.
People familiar with Norilsk say the Kremlin, which has an important if informal voice in many big business deals here, hasn't indicated whether it would prefer that Norilsk remain independent or merge. They say it has signaled it is happy for Mr. Potanin, who holds a 25.3% stake in Norilsk, to resolve the matter with Rusal, which is controlled by tycoon Oleg Deripaska, without political involvement.
Analysts say a merged Rusal and Norilsk could hold as much as $100 billion in market value, but people close to Norilsk have questioned how great the synergies of such a union would be. In 2006, Norilsk reported net income of $5.99 billion on revenue of $11.55 billion.
