On December 21 Interros holding, which represents Vladimir Potanin, announced that it would not buy the blocking stake in Norilsk Nickel (RTS: GMKN) from Onexim. Interros's refusal allowed the agreement between Onexim and UC RUSAL to come into effect. Under this agreement Mr. Prokhorov is to receive around USD 9 bn and 11% stake in UC RUSAL. Therefore, the purchase of the blocking stake in Norilsk Nickel, by Mr. Deripaska, is likely to start to merger preparations for Norilsk Nickel and UC RUSAL, and the creation of the first Russian global diversified metals and mining corporation.
"This transaction might be of interest and beneficial for all shareholders, the main issue is the price and conditions", the head of Interros, Mr. Klishas, said. "There is an opinion in the market that this merger is to produce a synergy effect. You know that the price is always a primary issue. If the price of a merger is good, it is good for everyone", he added. Mr. Klishas said that Interros did not carry out any negotiations with RUSAL. If RUSAL applies to Interros with a proposal, the holding would discuss this issue. We believe that this is not really so. Evidently, the companies already had negotiations, but the outcome is not likely to be disclosed until definite results are achieved.
According to RUSAL's press-release, the general director of UC RUSAL Alexander Bulygin said, that "he plans to create Russia's first diversified global metals and mining company". "Our company will join the ranks of the world's top five metals and mining giants which is to provide significant growth for the company's shareholders, and reinforce the international reputation of Russia as a strong industrial state", he said. This deal has been prompted by the development of the global metals and mining industry, and we believe that Norilsk Nickel's shareholders, management and employees are to support the establishment of a new world leader." The joint company is to have stronger potential to finance its projects. It is also likely to have strong potential for further transnational mergers and acquisitions. The higher the value of the company, the more space to maneuver its Russian shareholders are to have for global acquisitions. They would have a controlling stake even in case of large scale transactions.
This is why we are very upbeat abut the purchase of Norilsk Nickel shares by RUSAL. We expect that in the nearest time, RUSAL and Interros are to come to an agreement on the merger of the companies. This is likely to have a positive effect on Norilsk Nickel's stock price, which has considerably slipped recently amid negative news about complications in the dispute between Mr. Potanin and Mr. Prokhorov.
Presently, our fair value of Norilsk Nickel is USD 309, implying a 14% upside. We assign a HOLD recommendation for this stock.
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