Deripaska rejects London for future flotations
Russian oligarch to avoid the costs assocaited with corporate regulation in the traditional centre of mining finance. Mark Leftly reports from Moscow
Sunday 17 April 2011
Oleg Deripaska, the Russian metals billionaire, will turn his nose up at "costly" London when he floats major parts of his Basic Element investment empire over the next two years.
The 43-year-old oligarch shocked the mining industry last year when he chose Hong Kong over London for the listing of UC Rusal, which valued the world's biggest aluminium producer at $20bn. London has traditionally been the global centre for mining finance.
Mr Deripaska plans to float a number of companies by 2013, such as construction and auto machinery firms. However, fee-hungry bankers in London are unlikely to secure many juicy roles on these multi-billion-dollar transactions.
"London's a great place [for flotations], but not at the moment," said Mr Deripaska, who owns a £25m, six-storey house in Belgravia. "I can't see the advantage when you compare the costs with Russia, Chinese, European platforms. They are slightly more efficient. One of the costs [in London] is regulation, corporate rules."
Mr Deripaska has two other major reasons to be dubious about the UK. In 2009, LDV fell into administration, three years after Mr Deripaska had bought the Birmingham van maker.
At the time, Mr Deripaska was struggling with Rusal's massive debt burden – still nearly $11.5bn on 31 December, despite heavy restructuring – and was angered by the Government's refusal of a £30m bridging loan to save LDV.
The business secretary then was Lord Mandelson, who was at the centre of Mr Deripaska's other irritation with the UK: "yachtgate". In 2008, it was revealed that Mr Mandelson and the then shadow chancellor, George Osborne, had met Mr Deripaska on his yacht in Corfu, which sparked a huge feud between the politicians.
Mr Deripaska is likely to maintain his focus on the Hong Kong Stock Exchange for his next batch of listings. He said that he has forged close relationships "at various levels" of the Chinese government, and sees potential for growth in fast-developing inner Mongolia and the western provinces.
The next listing is likely to be of his EuroSibEnergy power group, valued at up to $5.6bn. Attempts to float the company stalled late last year, when the Beijing would not give approval to state-owned China Yangtze Power Company to become a cornerstone investor.
However, Mr Deripaska said that an announcement on a "transaction" involving EuroSibEnergy was due soon, which should then lead to a listing. It was recently reported that the company was in share swap discussions with RusHydro, a Russian state-owned company.
Rusal, Mr Deripaska's best known company, might also face a stock exchange shake-up. It's first deputy chief executive Vladislav Soloviev said that Rusal would decide by the end of the year whether or not to continue with its secondary listing on Euronext in Paris.
"We have to think about which exchange gives us most liquidity," said Mr Soloviev, who is considering swapping Euronext for another exchange. "For example, in Toronto there are a lot of metal producers listed and in Russia we have access to investors."
Rusal is currently involved in a huge battle with Interros Holding over the future of Norilsk Nickel, a nickel and palladium giant based in northern Siberia. Interros owns about 30 per cent of Norilsk and is considered to have control of the company, while Rusal has 25 per cent and believes that the company is hugely undervalued due to poor management.
The fight has even made its way to London, where an arbitrage court is set to decide on accusations from both sets of shareholders that the other has breached an agreement on the management of Norilsk. Rusal is believed to be seeking $1.5bn in damages.
Mr Soloviev said: "Norilsk is currently worth $51bn, but we believe it could be $80bn or even $100bn through efficiency and [better] corporate governance."
He argued that Norilsk needed to improve its logistics and should combine warehouses to strip out duplication of costs. Also, as Norilsk is in effect a monopoly, the company should be getting more money for its products.
For now, there is something of a ceasefire, as a vote on the membership of the board resulted in a better balance of representatives of Rusal and Interros, as well as independents who are acceptable to both parties.
Mr Deripaska is said to tightly manage Rusal. Vladimir Polin, the director of Rusal's aluminium division east – which runs the companies five largest smelters and is building two more – said "Let's just say he [Mr Deripaska] keeps an eye on things."
As are investors, who are now expected to visit the smelters once every six months as Rusal faces greater scrutiny as a public company. Evgeniy Nikitin, the managing director at the Krasnoyarsk smelter in southern Siberia, said that a group of 26 investors toured his facility shortly after the listing in January last year.
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