Banks pick sides as oligarchs fight for mining giant

Russian billionaires Deripaska and Usmanov hire London-based advisers to prepare rival bids for £27bn Norilsk Nickel

Mark Leftly
Sunday 02 March 2008 01:00
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Rival Russian oligarchs have hired a raft of London-based bankers as they gear up to bid for Norilsk Nickel, the mining giant valued at $54bn (£27bn), which has one of the worst pollution records in the world.

United Company Rusal, the mining group owned by billionaire Oleg Deripaska, has hired six banks, led by Merrill Lynch and Credit Suisse, to look at a takeover bid for Norilsk, and will buy a 25 per cent plus one share stake this week.

But a second oligarch, Alisher Usmanov, who owns a stake in Arsenal football club, also wants to merge his iron ore company, Metalloinvest, with Norilsk, which is the world's biggest nickel company. Usmanov has appointed Dresdner Kleinwort to examine a bid.

Norilsk visited potential investors last month, suggesting a dual listing on the London Stock Exchange as it is already quoted in Moscow. One of the questions being asked of its directors is how they are dealing with its pollution problems.

As the Russian oligarchs prepare for battle, most of the City's top mining bankers are now involved in one or other of the camps, having decided which has the best links to the Kremlin. The Russian government will ultimately approve the successful bid.

The country's presidential election takes place today, with First Deputy Prime Minister Dmitry Medvedev almost certain to succeed Vladimir Putin. As one banker working for Rusal said: "We took the view that Deripaska was the right guy to back as Usmanov is an Uzbek and not an establishment figure."

Deripaska is in the stronger position because of his blocking stake – a takeover can go through only with 75 per cent shareholder approval. A source said: "If Norilsk's board decided to merge with Usmanov on terms that Rusal didn't like, Deripaska could certainly block a deal."

Norilsk is said to have lined up UBS as its adviser. Citigroup is also known to have worked with Norilsk in the past.

Russia's environmental regulator is suing Norilsk for nearly $180m for polluting rivers in Siberia. The Blacksmith Institute, the environmental body, has named the group's operational centre of Norilsk as one of the 10 most polluted cities in the world, due to heavy sulphur dioxide emissions. Costs to clean up the city could be as much as $130m a year, claimed one insider.

A catalyst to the takeover bids was the falling out of Norilsk's two biggest shareholders, Mikhail Prokhorov, whose shares Rusal is buying, and Vladimir Potanin, who still owns about a quarter.

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