12:08 GMT, Jan 18, 2006
Norilsk, Alrosa shareholders discussed merger
MOSCOW. Jan 18 (Interfax) - Shareholders in Arctic mining and
smelting giant MMC Norilsk Nickel (RTS: GMKN) and Alrosa (RTS: ALRS),
Russia's Yakutia-based diamond monopoly, have discussed a possible
merger, Alexander Khloponin, governor of the Krasnoyarsk territory, said
on local radio.
"There was a meeting at which the idea of a merger between Norilsk
Nickel and Alrosa was discussed, but no concrete decisions have yet been
reached. The issued has been discussed once, at the level of
shareholders," said Khloponin, a former top-manager at Norilsk Nickel.
"These are absolutely different companies, and one of them must go
through the international standards compliance procedure. So there's no
prospect of a merger on the near future," Khloponin said.
Khloponin unveiled a possible merger scheme. "Shareholders of
Alrosa, on the one hand, and Norilsk Nickel, on the other, are
discussing, at various levels, including at the levels of the companies
themselves, possible approaches to a merger in which 25% of the merged
company would remain state-owned and the shareholders would own the
other 75%," Khloponin said.
Norilsk Nickel's share prices started grow within minutes of the
news that the merger discussion took place. This was the first official
acknowledgement of rumors of a merger, which have been circulating on
the market for several months. Neither company was willing to make
official comment on the information. "This information is in the rumor
category and we don't comment on rumors," Sergei Chernitsyn, Norilsk's
PR manager, told Interfax. Interfax was unable to obtain additional
comment from Khloponin himself.
Norilsk Nickel's share prices went up 1.2% on the MICEX Stock
Exchange to 2,184 rubles from 2,159 rubles a share by 1.30 p.m.,
although this was still 0.7% lower than Tuesday's closing price.
Analysts welcomed Khloponin's suggestion that the state might own
25% and shareholders the other 75% of a merged company.
"This option could suit everybody, both strategically and from the
point of view of risks, because the company would stay privately owned,
and the oligarch-related risks would be eliminated," an analyst at one
investment bank told Interfax.
Other analysts said they'd need more information such as the cost
of the merger in order to assess the transaction. They also said that
Alrosa would need to become more transparent in order to merge.
Leading rating agencies have said that an upgrade in Norilsk's
ratings is still being hampered by long-term political (in other words
oligarch-related) risks.
Experts have said they think that the state, which owns Alrosa,
could gain control of Norilsk Nickel in a year or two, when the company
has been reorganized. Norilsk is currently spinning its Polyus gold
mining off arm and expects to complete this operation in the spring of
2006.
The federal government is increasing its interest in Alrosa to
controlling, and expects to accomplish this by the fall of 2006.
Britain's Times newspaper quoted unnamed sources this week as
saying that the state could buy back Norilsk Nickel in the next two
years via a leveraged buyout, using Alrosa. The Times quoted the head of
investment banking at one Moscow bank as saying that "very senior levels
at Alrosa are considering the acquisition."
The paper also quoted Charles Ryan, chief executive of Deutsche
Bank UFG, as saying: "[Vladimir] Potanin [one of Norilsk's two biggest
shareholders] might well think it's time to invest his money elsewhere."
Ryan noted that Norilsk is being split into two companies, the nickel
company and a separate gold company called Polyus, which has assets
abroad, the newspaper said. Ryan suggested that Potanin could choose to
concentrate on the latter concern, the paper said.
The Times said that Potanin's options are limited if he is looking
to sell Norilsk Nickel. The paper said Potanin is unlikely to be able to
sell Norilsk to a foreign company, and that a takeover by Alrosa would
not be easy as the company is smaller than Norilsk and would be hard
pressed to find the cash to buy it, if it paid market price.
Norilsk, the world's biggest nickel and platinum-group metals
producer and Russia's biggest gold producer, had IAS revenue of $7.03
billion and net profit of $1.83 billion in 2004. Potanin, head of the
Interros holding, and Mikhail Prokhorov, Norilsk's general director, are
the company's main beneficiaries.
Alrosa mines 23% of the world's diamonds. The Russian Property
Agency currently owns 37% of Alrosa, the Yakutia Property Ministry holds
32% and eight districts in Yakutia own 8%. According to official
information, the company's employees own 23% of Alrosa.
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