RUSAL, SUAL merger may exclude Glencore assets

MOSCOW, Sept 28 (Reuters) - RUSAL and SUAL may exclude the alumina assets of Swiss trader Glencore in a merger to create the world's largest aluminium producer that is likely to be agreed next week, a source close to the deal said on Thursday.

A combined Russian aluminium company, said to be favoured by the owners of RUSAL and SUAL, would account for nearly 12 percent of world output of the metal used in cars and drinks cans. The source said it would be likely to acquire more assets.

"The parties came to the conclusion that, even without Glencore, the necessary synergy will be achieved and, taking into account RUSAL's and SUAL's development plans, the new company will still become the top aluminium producer," the source, who declined to be identified, told Reuters.

"In any case, I believe, the agreement will be reached next week with or without Glencore," the source added.

RUSAL, SUAL and a Glencore spokeswoman in Switzerland all declined to comment on the proposed merger.

RUSAL, currently the world's No. 3 aluminium producer behind Alcoa Inc. signed a memorandum in August to create a $30 billion company in which it would control 64.5 percent, sources close to the deal have said.

SUAL would control 21.5 percent and Glencore 14 percent of the merged company, the sources said at the time.

RUSAL produces three-quarters of Russia's aluminum and is controlled by Oleg Deripaska, Russia's sixth-richest man, through his Basic Element company.

SUAL's main owner, Viktor Vekselberg, told Russian President Vladimir Putin earlier this month an alliance with RUSAL and the alumina assets of Glencore was his company's preferred option.

ALUMINA ASSETS

The source said Glencore, under the original proposal, was to contribute alumina refining assets to the new company. These include the Aughinish refinery in Ireland, which it owns outright, and Windalco and Alpart in Jamaica, where it owns 93 percent and 65 percent respectively.

It was also to contribute its 44 percent stake in the Eurallumina refinery in Italy and its wholly owned Kubikenborg Aluminium AB aluminium smelter in Sweden, the source said.

"It was a good idea to have more alumina assets, as RUSAL lacks alumina. But the deal can be implemented perfectly well without those assets as SUAL has the huge Komi bauxite and alumina project, which it is currently implementing with RUSAL," a Russian industry analyst, who declined to be named, said.

Alumina, refined from bauxite, is fed into a smelter to make aluminium. About two tonnes are needed to make a single tonne of metal.

SUAL has said it is still considering alternatives to a merger, including an initial public offering of stock this year. Vekselberg told President Putin on Sept. 13 his company would decide within a month which option to take.

Russian business media have reported that some minority shareholders in SUAL are opposed to the proposed merger.

A source close to the deal has told Reuters that SUAL was seeking an option to sell its stake in a proposed merged company within a year. [ID:nL19885714]

RUSAL produced 2.8 million tonnes of aluminium last year and plans to raise output to 5 million tonnes by 2013, part of a $16.7 billion investment also including power and raw materials.

SUAL produced 1.1 million tonnes last year and wants to double output by 2012.