Potanin a major obstacle to $60 billion Rusal, Nornickel merger (updated)

En+ MKPAO

06/07/2022 14:00

(Updates with detail on Rusal's international assets)
    By Clara Denina and Pratima Desai
    LONDON, July 6 (Reuters) - Russian businessman Vladimir
Potanin is likely to be the biggest barrier to a potential $60
billion merger between Russia's largest metals producers
Nornickel  GMKN.MM  and Rusal  0486.HK , two sources with direct
knowledge of the matter said.
    Potanin has said a tie-up could strengthen the companies'
defences against any sanctions the West might impose on them,
and in an interview with Russian media said he would not step
down as CEO. 
    The two sources, asking not to be named because of the
sensitivity of the issue, said any deal was unlikely as long as
Potanin remained Nornickel's boss and major shareholder.     
    "Until he bites the bullet, steps down as CEO and sells down
his stake to become a minority shareholder, no deal is
possible," one of the sources said.
    "Even if the companies are not under international
sanctions, there will be a de facto global international finance
ban on them as a result of the UK sanctions on Potanin".
    Britain last week placed sanctions on Potanin.  urn:newsml:reuters.com:*:nL8N2YG2PW
    Neither company has been directly targeted by Western
restrictions imposed on Russia over the war in Ukraine, but
Rusal was subject to U.S. sanctions between April 2018 and early
2019 until its founder Oleg Deripaska agreed to relinquish
control.
    The Interros Group, which manages Potanin's assets, and
Rusal's majority shareholder EN+ Group  ENPG.MM   ENPLq.L 
 0486.HK  did not comment. Rusal did not respond to a request
for comment.
    Rusal is the world's largest aluminium producer outside
China, while Nornickel's palladium and nickel account for 40%
and 7% of global mined supplies respectively. 
    Adding weight to Potanin's comments in this week's interview
that a merger could offer shelter from sanctions, analysts say
the combined clout of the two companies, most of whose customers
are in Europe and the Americas, would leave the West wary of
sending prices soaring for metals that are critical to its own
industries.
    Already energy prices have hit record levels in Europe
following the West's efforts to wean itself off Russian gas.
    The London Metal Exchange is looking into what UK sanctions
on Potanin mean for it, its participants and for Nornickel's
brands traded on the bourse.  urn:newsml:reuters.com:*:nL8N2YH2WK
    
    INTERTWINED AND EDGY
    The two producers are intertwined because Potanin and Rusal
own 36% and 26% respectively of Nornickel.
    Relationships between the two sides, however, have long been
marked by disputes and it is unclear whether a new agreement can
be reached on dividend payouts once the existing deal expires on
Jan. 1, 2023.
    "A merger could discourage Nornickel from paying dividends
in the coming years," said Kirill Komarov, an analyst at Tinkoff
Investments.  
    Potanin, Rusal and other Nornickel shareholders in 2012
signed the existing 10-year agreement on the size of the payouts
to end a previous long-standing dispute. 
    A third source with direct knowledge said they were unaware
talks were taking place and that Potanin's interview was
posturing ahead of negotiations to replace the dividend payment
agreement once it expires.  urn:newsml:reuters.com:*:nL1N2YM0B9
    One of the sources said that another obstacle to the
creation of a "national champion", as Potanin put it in his
Russian television interview, is that Rusal has operations in
Australia, Guinea, Ireland and Jamaica, as well as Russia. 
    These assets may have to be spun out into a separate company
to make it easier to get financing and ensure operations run
smoothly without further scrutiny from the United States or
Europe.

 (Reporting by Clara Denina and Pratima Desai; editing by
Barbara Lewis)
 ((Clara.Denina@thomsonreuters.com;))