Russians set to form world's biggest aluminium company

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The Independent Online

Two of Russia's wealthiest oligarchs appear set to forge the world's largest aluminium company in a move that threatens to reshape the industry and give Moscow greater clout on the world stage.

If it goes ahead, the merger between Sual and Rusal, controlled by the oligarchs Viktor Vekselberg and Oleg Deripaska respectively, would give Russia a new national champion alongside Gazprom, the world's largest producer of gas.

President Vladimir Putin has reportedly given the corporate marriage his blessing; he is known to be keen for his country to consolidate its fabulous mineral and energy reserves into a handful of state-controlled or state-friendly companies.

A report that a memorandum of understanding has been signed between the two aluminium producers appeared in the Russian daily Kommersant newspaper yesterday, citing an unnamed partner of Mr Vekselberg.

Sual and Rusal declined to comment on what one spokesman described as "rumours". Neither company officially denied the report though and shares in Sual, a small portion of which are traded in Moscow, climbed almost 2 per cent.

The report said Mr Deripaska, Russia's sixth richest man with a $9bn (£4.75bn) fortune according to Forbes, would gain 75 per cent of the merged company.

Mr Vekselberg, who spent about £50m in 2004 on acquiring the world's second-largest collection of Fabergé eggs, would control the remaining 25 per cent. He is Russia's fifth richest man and worth $10.1 bn, according to Forbes.

Rusal and Sual are Russia's top two aluminium producers; Rusal is the bigger of the two being rated as the third largest aluminium producer in the world. The two already work together and are equal partners in a $1.2bn bauxite project in north-west Russia.

If they did join forces, the merged entity, which has provisionally been valued at $22bn, would overtake the New York-based Alcoa as the world's largest producer of aluminium.

Initially, it would produce 3.7 million tons of primary aluminium a year though that figure would apparently rise sharply within five years. The merged company would keep both brand names, Sual and Rusal, and would have a 100 per cent monopoly in aluminium production in Russia.

A tie-up has apparently been negotiated for more than a year and a half and will allow Mr Deripaska to realise his long-time dream of acquiring Sual and creating a world-beating industrial conglomerate.

This month the famously ambitious oligarch met Mr Putin for talks on the state of Russia's aluminium industry, among other things.

Conversely, a tie-up would allow Mr Vekselberg, one of the biggest shareholders in the Anglo-Russian oil venture TNK-BP, to convert some of his huge wealth into cash. He is reported to be keen to diversify from aluminium and invest more in oil.

If the merger goes ahead it looks likely to delay a planned initial public offering by Sual in London that was expected to take place this year. This month Sual appointed the investment bank JP Morgan Cazenove to oversee the flotation that looked likely to value SUAL at up to £2bn. It has also named Brian Gilbertson, a veteran City deal-maker and the former chief executive of BHP Billiton, as chief executive.

Analysts said yesterday the London IPO plan might be a back-up in case the merger falls through.

Olga Okuneva, at Deutsche UFG investment bank, said approval from the Kremlin was key to the deal.