On February 19 the Norilsk Nickel board of directors (RTS: GMKN) considered Tuesday its merger with Metalloinvest, which manages Gazmetall assets. The proposal was made by investment bank Dresdner Kleinwort. The news came from Andrei Klishas, NorNickel board chairman and Interros general director. According to Klishas, the NorNickel board has instructed the management to consider the aspects of the deal. The possible price of the merger and its synergetic effect are being discussed.
According to another market participant, the merger was initiated by Alisher Usmanov, the prime owner of Gazmetall holding, which submitted the relevant proposal to the NorNickel board. A source in the banking circles said Dresdner Kleinwort recently advised Gazmetall on mergers and acquisitions and that Gazmetall’s proposal on a merger with NorNickel may have came as a result of those consultations.
Information: Gazmetall assets are controlled by investment company Metalloinvest, and in late 2006, Gazmetall completed consolidation of its iron ore and steel-casting assets. Gazmetall is Russia’s biggest iron ore producer. The company controls the Lebedinsky and Mikhailovsky GOKs (RTS: mgok), as well as the Oskol electrometallurgical plant. Vasily Anisimov and Andrei Skoch are viewed as À.Usmanov’s partners for Gazmetall.
In our opinion, the merger would play into the hands of both companies, allow Nornickel to diversify its product mix, with iron ore products, and Gazmetall to gain publicity, making its planned IPO unnecessary. However, much hinges on the terms of the deal and the price at which A. Usmanov estimates his assets as part of the deal. In our view, the partners are unlikely to reach a tangible synergy effect on the deal. We do not rule out that the step has been taken with a view to raising Norilsk Nickel’s market value prior to its merger with Rusal.
We estimate the fair value of Norilsk Nickel shares at around USD 309 per share, which is slightly above the current stock valuations.
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