The struggle for Norilsk Nickel escalates

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Lately the focus on the Russian stock market are two companies – a retailer Magnit and mining and metallurgical company “Norilsk Nickel”. In their actions there is increased volatility. And if the first situation was resolved – the retailer moved to VTB, “Norilsk Nickel” joint war only starts to flare up.
Two bears is difficult to get on in one den. Historically, the majority – of “RUSAL” Oleg Deripaska (owns 27.8 percent of GMK) and “Interros” Vladimir Potanin (30,4%) – had an uneasy relationship. They have different points of view on the development of MMC “Norilsk Nickel” Oleg Deripaska insists on high dividend company (they needed to Finance the debt burden of RUSAL), and Interros is considering options for increasing reserves and investments of the company.
Previous joint war in 2011-2012, ended with the conclusion of the shareholders ‘ agreement and the involvement of Roman Abramovich in the peacemaker. The settlement agreement has a complex structure, worked on it a lot of lawyers, but it is not published, so there may be unexpected nuances. Part of this agreement expired in December 2017 Fund Crispian Roman Abramovich is now able to sell its 4.9% of MMC “Norilsk Nickel” (Roman Abramovich and his partners in Evraz owns 6.3% of the package). This may change the balance of power between majorities “Norilsk Nickel”.
Two positive and two negative scenario for RUSAL
RUSAL is satisfied with only two options: if Roman Abramovich will retain its stake in Norilsk Nickel, or distribute your package between “RUSAL” and “Inteross”. RUSAL is ready to buy a 2% stake for $750 million In a case if “RUSAL” will get more than 2.2% of Norilsk Nickel, the package will exceed 30% and there is an obligation to submit an offer to all shareholders. Only for the purchase of a package “Interros” will be about $10-20 billion, to attract this amount in the current environment of easy external financing markets are closed, and the Russian state-owned banks will participate in such a transaction only after the approval from the top.
Another option scenario is if the package is Roman Abramovich will be fully redeemed “Inteross”, its share will rise to 37%, and it will strengthen its influence in the company. At the same time “Inteross” given the complicated ownership scheme package “Rusala” may not arise the obligation to submit an offer to the other shareholders. This is also a negative option for “Rusala”. The importance of the moment for “Rusala” shows the appeal in the High court in London in respect of the Fund Crispian.
There are several options for the development of joint war in GMK “Norilsk Nickel”. Exactly how the situation will develop – will know soon. In any case, actions “Norilsk Nickel” guaranteed high volatility. Large drawdowns can be used for shopping. Norilsk Nickel is definitely an interesting company engaged in the production of copper, Nickel and palladium, which have high demand in world markets, with a record for metallurgists a margin of 50%.
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Roman Tkachuk,
Senior analyst,
Alpari