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Interview: UC RUSAL, Norilsk can challenge BHP Billiton

Deals

RusAl and Norilsk Nickel should pool their assets to take on global giants like BHP Billiton and seek takeover targets around the world, RusAl’s chairman said in an interview on Friday.

“The issue of uniting RusAl and Norilsk Nickel has been discussed for a long time in various forms and configurations,” said Russian billionaire Viktor Vekselberg, who is also a major shareholder in the aluminium powerhouse. “For the Russian economy and for the world economy, the appearance of a new player which could compete with leaders like BHP Billiton is very important.” Russian companies, war chests overflowing from a long-running boom in energy and commodities, have been banding together to increase their might and stake out leading positions on global markets, tacitly encouraged by outgoing President Vladimir Putin’s Kremlin. The process has also helped some of Russia’s billionaire industrialists to cash out of the investments first made in the chaotic privatizations of the mid-1990s.

On Thursday, RusAl closed the acquisition of a strategic stake in Norilsk Nickel from a core shareholder, fellow billionaire Mikhail Prokhorov, now a co-owner of UC RUSAL together with Russia’s richest man, Oleg Deripaska, and commodities trade house Glencore. “I think that, having made this step, the shareholders will support further integration of these assets,” said Vekselberg, whose Renova Group owns stakes in UC RusAl and BP’s Russian oil venture TNK-BP.

 
MAYBE METALLOINVEST TOO
RusAl, which delayed a long-planned initial public offering last year because of the global credit crunch, will make the placement by the end of next year and use its public status as a “launch pad”, paying for new acquisitions with shares, he said. Further integration with Norilsk Nickel was not a precondition for the public offering, he said. But the combination would have more financial muscle for ambitious takeover attempts. Proposals for unifying the two companies would be developed soon, he said, and options could include buying out minorities on the stock market. He said UC RusAl’s shareholders were close in “aims and mentality” to Norilsk Nickel’s acquisitive shareholders, led by Vladimir Potanin, who resisted his long-time business partner Prokhorov’s attempts to exit the company.

Norilsk Nickel is in talks about a possible merger with Metalloinvest, an iron ore and steel firm founded by Alisher Usmanov, an Uzbek-born billionaire and shareholder in London’s Arsenal football club. Vekselberg, who said UC RusAl’s founding aim was to build a diversified company, said he would consider allowing Metalloinvest to join the party, increasing the heft of a combined operation and broadening its range of products. “Metalloinvest is a very interesting company, an interesting structure, and on today’s market iron ore is very attractive, so I think we can have a very interesting and substantial discussion,” Vekselberg said. “I don’t see any major reasons why we couldn’t agree, except the traditional ones -- the price, the corporate structure and strategic vision.”

 
“NO ALTERNATIVE TO OIL”
Vekselberg, who has been besieged by rumors that he and his Russian partners are on the brink of selling out their stakes in TNK-BP to state gas monopoly Gazprom, and denied again he was in sale talks and said no offer was on the table. Vekselberg has previously said a fair price for TNK-BP would be $60 billion, and an offer based on that valuation an offer would not be ignored, he said. “If we received an offer, we would consider it,” he said. But he remained bullish on Russian oil investments in spite of concerns about falling output and a progressive tax on oil profits which chips away at corporate gains from a rising price. He said proposed tax changes and weak medium-term prospects for alternative energy made him loath to part with the stake. “Oil and gas assets are still attractive,” he said. “The government is starting to seriously reconsider its tax policy and lightening the tax burden from next year. It is not enough but it’s a step in the right direction.” “In the medium term, there is no alternative to oil and gas.” (Reuters)

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