As expected the proposal by Norilsk Nickel management to buy back some of the stake in it controlled by Oleg Deripaska’s RusAl has been rebuffed.
In a statement RusAl said that the latest Norilsk Nickel proposal to buy 15% of RusAl’s 25% stake for $8.75 billion, or $306 per share did not reflect underlying value in RusAl’s stake.
“Having carefully discussed the letter received from MMC Norilsk Nickel proposing to acquire 15% of the outstanding ordinary shares of Norilsk Nickel, have unanimously resolved to reject the proposal. The Board of Directors believes the proposed terms of the deal do not reflect the fundamental value of a major stake in Norilsk Nickel, which remains a strategic investment for RUSAL.”
The latest offer, which came after the rebuff of two previous buyout offers in March and last December, come after a three year shareholder dispute between RusAl, which has a 25% stake in Norilsk, rival shareholder Interros, which is believed to have about a 30% stake in Norilsk, and Norilsk management, which RusAl has claimed is too close to Interros.The dispute has seen a number of buyout proposals from RusAl and Interros, as well as the Norilsk Managementand legal action in three different jurisdiction to prevent previous Norilsk management share buyback attempts, as well as the sale of an 8% stake to Dutch commodities brokers Trafigura.
The rebuff by RusAl is now expected to see a general offer made on similar terms, to minority Norilsk Nickel shareholders. Uralsib analyst, Marat Gabitov, says the rebuff was widely priced in, and was at a reduced margin to previous offers, but will set the scene for further buybacks.
“We see the news as neutral for UC Rusal, as a negative reaction to the offer was quite expected, given the size of the stake – just 15% out of 25% – and the fact that the implied equity value was reduced by 9% from the previous USD 64bn. Moreover, we do not rule out that the offer was initially designed to provide Interros, which effectively controls Norilsk Nickel, to launch a share buyback at USD 30.6/ADR or a 27.5% premium to the yesterday’s close.”
BСS analyst, Oleg Petropavlovsky believes a new buyback will see an alliance of Interros, Norilsk Management and Trafigura, take a controlling stake.
“According to our forecast, MMK will announce a buy back for at least 2.8% of its shares, which will be enough for the alliance of the management of Norilsk Nickel, Trafigura and Interros to get a controlling stake. So, in case the entire free float (23%) is on offer, the Company will buy out each seventh share from the minority shareholders.”