Roman Abramovich has gained control of the world’s biggest nickel and palladium mine after he brokered a deal forcing two other Russian billionaires to end their four-year feud over the assets.
The Chelsea football club owner now has the biggest voting stake in Norilsk Nickel, valued at $30bn (£18.5bn). The company was one of the biggest prizes handed to insiders in the post-Soviet carve-up of Russian industry, which created a generation of oligarchs.
Vladimir Putin, who returned to the presidency in May, had said he wanted an end to a feud between two of Russia‘s richest men, Vladimir Potanin and Oleg Deripaska, over board control and payments to shareholders in the firm.
Their deal appears to bear the stamp of the Kremlin, with the well-connected Abramovich acting as enforcer to end the dispute.
Potanin and Deripaska agreed that Abramovich would buy a 7.3% stake, in the form of treasury stock, at market price. The stake is now worth around $2bn.
The three parties will each contribute equal stakes, amounting to 22% of Norilsk, to an escrow account that will be controlled by Abramovich’s investment firm Millhouse. The move will give him the largest say over how the company is run.
“Millhouse will control the compliance with the partnership agreement while voting with this block of shares,” Potanin and Deripaska said in a joint statement issued by their firms.
Abramovich, who with a fortune of $12.1bn is the 68th-richest man in the world, according to Forbes magazine, is widely viewed as having the strongest ties to the Kremlin of any Russian oligarch.
The deal cements his position as one of Putin’s favourites. Now a co-owner of the FTSE 100-listed steel company Evraz, Abramovich won control of the oil firm Sibneft after its privatisation in the 1990s. He sold Sibneft in 2005 to Gazprom , the state gas export monopoly, for $13bn. Two years before that, he bought Chelsea.
The latest deal reduces the voting power of Potanin’s holding company, Interros (now 28%) and that of Deripaska’s Hong Kong-listed aluminium giant Rusal, currently 25%. In return, Deripaska will get the higher dividends he has long sought. Potanin, who has controlled Norilsk since he won it in the “loans-for-shares” privatisation scheme he ran as a top official in the 1990s, will be chief executive.
The two sides have suspended legal proceedings. A London arbitration court had been due to open hearings into a case dating back to 2010 in which Deripaska accused Interros, Potanin’s investment company, of reneging on a deal to run Norilsk in the interests of all shareholders.
Potanin and Deripaska have been locked in a shareholder dispute since Rusal bought a 25% stake in Norilsk just before the 2008 global crash, in a cash-and-stock deal worth around $14bn.
The acquisition was meant to herald a merger into an all-Russian major able to compete with global miners such as BHP , but that plan was crushed by the financial crisis.
The loss-making Rusal is now burdened by $10.7bn in net debts, a figure greater than its market capitalisation, of $8.9bn. The company is also battling a fall in aluminium prices. Deripaska has resisted parting with the stake in Norilsk, now worth around $7bn, the lion’s share of Rusal’s equity value.
Talks to end the dispute have been on and off, but sources said in October they had resumed, fuelling speculation that a deal was in the works.
Russia’s richest man, Alisher Usmanov, whose Metalloinvest owns a 4% stake in Norilsk, has in the past tried to mediate between the Norilsk shareholders.
Rusal said in an earlier statement that the deal would ensure Norilsk paid stable dividends for the years 2012-2014. Shareholders agreed that Norilsk would pay at least 50% of its annual net income as dividend, according to a source close to one of shareholders.
Deripaska never won a real say on the Norilsk board, instead being overruled by Potanin, who launched a series of share buybacks with the backing of company management.
Norilsk will cancel the rest of its treasury shares, amounting to about 10%. Interros and Norilsk are not to sell shares for five years, and Millhouse is not to sell for three years, the companies have agreed.