The long-standing conflict between the shareholders of MMC Norilsk Nickel, which broke out a month ago, entered a new phase. Last week Interros Vladimir Potanin and Oleg Rusal Oleg Deripaska agreed to buy 4% of Norilsk Nickel from Crispian Investments owned by Roman Abramovich and partners, in proportion to their current shares in the company. The agreement was approved by the High Court of London, where in early February Deripaska appealed, deciding to challenge the sale of a 4% stake in Norilsk Nickel to Potanin.
Does this mean that the conflict is over? Hardly. The deal can be deployed if, at a regular meeting on May 14-17, the court takes the side of Deripaska and confirms that the sale of the Abramovich package violates the 2012 shareholder agreement between the majority shareholders of MMC. Then Interros and UC Rusal will have to return Crispian 4% of Norilsk Nickel together with the dividends paid for these securities, and Abramovich's company - money. The damage from the collapse of the transaction in Crispian was estimated at $ 271-821 million.
The mechanism of the so-called "Russian roulette" (it was registered in an amicable agreement) could also bring the conflict to an escalation: UC Rusal is ready to buy out Potanin's stake in Norilsk Nickel (30.3%) in the range of $ 25-32 for ADR ($ 10.8- 13.9 billion) or sell its stake (27.8%) to the company from an estimate above $ 32 for ADR (more than $ 14.1 billion). However, this option seems fantastic: the required financing ($ 11-15 billion) looks excessive, even if one of the parties decide to support state banks. And the search for foreign partners is likely to require agreement with the government.
Forbes estimated what three billionaires came to during the years of war and peace in Norilsk Nickel and what a possible deal will bring them.
Oleg Deripaska is in a difficult situation. On the one hand, he is again and again in the epicenter of political scandals (this includes accusations of interference in the American elections, and the story unfolding around the ill-fated acquaintance with Nasty Rybka). On the other hand, his main asset, UC Rusal, has long been burdened with debts, and not least because of the purchase in 2008 of 25% + 1 share of Norilsk Nickel from Mikhail Prokhorov on a loan from foreign banks. However, the past is a long time ago when Deripaska fought against creditors and was criticized by his partner Viktor Vekselberg. He demanded to sell the stake in Norilsk Nickel, pay off his debts and start paying dividends. Deripaska refused - natural stubbornness and rigidity affected, and also a megalomaniac dream, sooner or later, to unite Rusal with MMC.
Last years, luck was on the side of Deripaska. Aluminum prices were rising, the billionaire was able to hold a record IPO last year at $ 1.5 billion of its holding company En + in London and even thought about reviving the idea of building the Taishet aluminum plant.
As the head of the analytical department of Loko-bank Kirill Tremasov wrote in his telegram channel MMI, in 2017, net cash flow from the operating activities of the aluminum producer was $ 1.7 billion, almost half went to investments ($ 842 million), another $ 493 million. Rusal sent to repay the debt and pay interest. In addition, the company received $ 783 million in dividends from MMC and was able to pay $ 300 million to its shareholders. At the end of the year, Rusal's net debt fell by $ 773 million, to $ 7.7 billion.
Aton's senior analyst Andrei Lobazov notes that Rusal's net debt is still large (3.6 EBITDA) and the buyout of the stake from Abramovich will add about 10% to the debt load. "Despite this, Norilsk Nickel is a quality asset, and it is quite possible to find the necessary financing for acquiring a small stake," Lobazov believes.
Financial analyst of the company "Otkryt Broker" Timur Nigmatullin adds that "RusAl" repays loans at an accelerated rate, using a cyclical growth in the metals market, but in order to keep the trend, it will most likely have to give up dividends. He adds that in any case, "Rusal" will face not only an increase in debt, but also an outstripping increase in the cost of its services: more than 80% of RusAl's rates are floating and grow following the Fed's rate. "In cyclical markets, this situation is very dangerous, it is enough to recall the example of Mechel," says Nigmatullin.
On the other hand, Rusal may not raise a loan to close the deal with Abramovich. At the end of last year, the company had $ 814 million in cash and cash equivalents on its accounts.
Vladimir Potanin looks like a clear winner - his assets are not burdened by debt and are profitable. Analysts agree that for him the purchase of MMC shares will not be a problem. "2% in Norilsk Nickel with a premium is about $ 700 million. Considering that since the signing of the shareholder agreement, Interros received $ 4 billion in dividends from Norilsk Nickel, as well as the fact that initially there was a desire to redeem a larger package, attracting financing for Vladimir Potanin is not a big difficulty, "- says Andrei Lobazov.
The businessman himself is also full of optimism: "I believe in the company, in its prospects," Potanin told Vedomosti. The contradictions between the head of Interros and Oleg Deripaska have long been known. This is not only the apparent reluctance of Potanin to unite his company with "Rusal". There is also a more pragmatic aspect. If Deripaska always lobbied for the payment of maximum dividends on the part of Norilsk Nickel, Potanin insisted that the profit of MMC should be invested in the development of the company.
Now, Norilsk Nickel is working on several large projects. The most expensive of them is Norilsk I in Taimyr, one of the largest deposits of polymetallic ores in Russia (platinum, nickel and copper). The field became an apple of discord for "Norilsk Nickel" and "Russian Platinum" by Musa Bazhaev F 157. In 2012, the latter won the right to develop it, but could not begin work - allegedly Norilsk Nickel did not give it access to infrastructure. GMK itself tried to challenge the decision of Rosnedra for several years, but without success. In February, the companies decided to join forces and create a joint venture on a parity basis. The total investment in the project is estimated at 250 billion rubles (about $ 4.4 billion).
ACRA analyst Maxim Khudalov notes that the main problem with Norilsk I is that at the moment there are almost no unloaded capacities at MMC in Taimyr, therefore it will not be possible to fully and quickly enter these facilities into operation. But if the conflict of shareholders of Norilsk Nickel does not reach the catastrophic scenario with the Russian roulette, the company is quite able to implement the project. In the long term, it can give a significant increase in production, either at the mining site itself, or, more likely, the ore will be processed to matte and transferred to the less occupied capacities of Norilsk Nickel, for example, to the Kola Peninsula or generally to Finland.
In addition, the MMC is developing the so-called "Sulfur Project" - an environmental program for the disposal of sulfur waste. "A truly grandiose project, which involves the construction of large facilities for the production of sulfuric acid with its subsequent neutralization, will cost us $ 2.5 billion of investment," Potanin said of him. Norilsk Nickel's shareholders are unlikely to be pleased with the implementation of the Serebroject project, since it does not bear additional value for the company. However, as Khudalov notes, the reluctance of the MMC to solve the environmental problems of the cities where it operates would ultimately entail fines that are constantly growing in Russia, as well as higher anti-dumping duties. "If this is not done, European and American regulators will have a remarkable leverage over the company when they think about imposing various kinds of sanctions," said the analyst, emphasizing that in the long term the implementation of environmental projects will strengthen the position of MMC in the international market.
At the end of last year, Norilsk Nickel launched the Bystrinsky GOK in Transbaikalia, and in 2016 proposed the merger of Bystrinsky GOK with Baimskaya ore area in Chukotka (the Romanov Millhouse is being developed by Roman Abramovich), and then withdraw the merged company to the stock exchange. Investments in construction are estimated at $ 1.5 billion. "The project already gives a large volume of ore that goes to China, and, apparently, MMC will double it," Khudalov said.
MMC is benefiting from the rise in nickel prices, which is spurring the increasing demand for electric vehicles, now they are about $ 13,800 per ton. Maxim Khudalov believes that, from the point of view of demand, the prospects for the nickel market are good: "The market has not yet played its decline. The average price in 2011-2015 was about $ 15,000-17,000 per tonne of nickel. And we think that this level is quite achievable, "the analyst of ACRA concludes.