Abramovich buys Norilsk stake to end row

Potanin will be metal producer’s new chief executive

© Bloomberg News

Roman Abramovich, the Russian billionaire owner of Chelsea football club, has agreed to buy a 7.3 per cent stake in Norilsk Nickel in a deal to end the company’s long-running shareholder conflict.

While Mr Abramovich’s stake will be dwarfed by the stakes of Norilsk’s two other billionaire shareholders – Vladimir Potanin and Oleg Deripaska – the Chelsea owner will hold the largest voting stake of the three, allowing him to intervene in any future disputes at the world’s largest nickel and palladium producer.

The deal appears to signal the end of one of Russia’s most colourful shareholder battles, which has handicapped Norilsk’s long-term strategy and corporate governance since 2008 when Mr Deripaska’s Rusal first became an investor.

Millhouse, the investment company owned by Mr Abramovich, will acquire the stake from Norilsk subsidiaries at market price, an amount that would suggest a valuation of about $2bn, and also three seats on the 13-member board of directors.

Rusal, Millhouse and Mr Potanin’s Interros will each place 7.3 per cent of their stakes into an escrow account that Millhouse will have control over, giving Mr Abramovich’s group a 22 per cent voting stake against 20.7 per cent for Interros and 17.8 per cent for Rusal.

Analysts said the real winners of the deal appeared to be Mr Abramovich, who could recoup as much as 5 per cent of his investment a year in dividends, and Norilsk minority shareholders who have been promised “large-scale adjustments” to the company’s strategy, sales policy and dividends policy.

Mr Potanin and Mr Deripaska, who have been at odds over Norilsk’s stock buybacks and dividend policy, will both lose their blocking voting stakes in the company.

As part of the agreement, Vladimir Strzhalkovsky will have to resign as Norilsk chief executive – an oft-voiced demand of Mr Derpaska – while Rusal has also been assured stable dividend payments over the next three years, with payouts expected to equal up to 50 per cent of Norilsk’s net income.

Though Mr Potanin will get the chief executive position from Mr Strzhalkovsky, the entrance of Mr Abramovich as a neutral third party may ultimately reduce the influence of Interros, which has long held an edge over Mr Deripaska at the company.

Oleg Petropavlovskiy, a metals analyst at BCS, the Russian brokerage, said it was unlikely that Rusal or Interros would have agreed to the current deal if not for intervention by the Kremlin.* Mr Deripaska and Mr Potanin met Prime Minister Dmitry Medvedev in late October while Mr Potanin met President Vladimir Putin just 10 days ago.

“This is a political decision,” Mr Petropavlovskiy said. “The government told Interros and Rusal to stop this conflict and that is all. That’s why Potanin agreed to reduce his voting rights – it’s just an order.”

Representatives for Interros and Rusal repeatedly stressed that all parties were satisfied with the outcome, noting that better corporate governance at the company was likely to raise the value of their stakes.

Rusal’s shares rose 2.2 per cent in Hong Kong, while Norilsk’s stock rose 1.4 per cent in Moscow and 3.3 per cent in London.

*This article has been updated since original publication to correct the name of Russian brokerage BCS

Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

More on this topic

Suggestions below based on Norilski Nikel Gorno-Metallurgicheskaya Kompaniya OAO