Norilsk Nickel Rises on $2 Billion Share Buyback Plan

By William Mauldin and Yuriy Humber

Aug. 25 (Bloomberg) -- OAO GMK Norilsk Nickel, the world's largest miner of nickel and palladium, jumped in Moscow on a plan to buy back as much as 49 billion rubles ($2 billion) in shares.

Norilsk announced the buyback, at 6,167 rubles a share, late on Aug. 22 on its Web site. United Co. Rusal, billionaire Oleg Deripaska's aluminum producer that owns 25 percent of the mining company, said it opposes the buyback because it doesn't give value to all Norilsk investors.

``This should be positively received, although minority shareholders need to be aware that these actions are not necessarily in their best interests,'' UralSib Financial Corp. analysts Michael Kavanagh and Dmitry Smolin said in a report today. The plan is ``a continuation of the conflict between Rusal'' and Norilsk's biggest shareholder, Vladimir Potanin.

Norilsk jumped as much as 6.7 percent on the Micex Stock Exchange. It traded at 5,079.99 rubles, or 4.2 percent higher, at 1:51 p.m. in Moscow, valuing Norilsk at 967 billion rubles.

Rusal and Potanin have clashed over Norilsk's strategy and performance, as Deripaska, Russia's richest man, wants Rusal to combine with Norilsk to create a diversified base metals company capable of competing with BHP Billiton Ltd. Potanin is seeking a merger with Alisher Usmanov's iron ore miner, OAO Metalloinvest, and also wants Norilsk to acquire producers of uranium and potash.

Treasury Shares

The buyback should win minority shareholder ``cheer'' for Potanin against Rusal and will offer support for Norilsk's stock, which has declined 21 percent this year, Troika Dialog analyst Mikhail Stiskin said in a note to investors today.

The bought-back shares will be stored as treasury shares, which need to be sold or canceled within a year. Still, Norilsk management loyal to Potanin will be able to ``mobilize'' the shares when needed, Stiskin said. The shares can be used for mergers, sold to Metalloinvest, or even an offshore subsidiary, thus regaining voting rights, he said.

Norilsk's buyback is planned on a pro-rata basis, equal to about 4.2 percent of shareholders' equity, and the price is 27 percent higher Norilsk's Aug. 22 closing price. Less than a year ago, Norilsk sold 7.5 million of its shares to institutional investors for 11 percent more than the buyback offer, or $285 apiece.

``The company could be perceived to be trading against its shareholders,'' UralSib's Kavanagh and Smolin said.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net; Yuriy Humber in Moscow at yhumber@bloomberg.net