RUSAL rejects Norilsk offer of full merger talks

MOSCOW -- United Company RUSAL rejected a proposal by Norilsk Nickel's management to discuss a full merger as the two Russian metals giants geared up for a showdown over the election of a new board at Norilsk. UC RUSAL, which in April became a one-quarter shareholder in Norilsk, is lobbying for equal representation with billionaire Vladimir Potanin and independent shareholders on the nine-man board at Norilsk. Norilsk's management wants a 13-man board. "We are seeking to increase the number of board members to 13 from the current nine, as we believe this will lead to an increase in the number of independent directors," Norilsk chief executive Denis Morozov told reporters on Tuesday. Russia's mining giants, owned by several of the country's richest men, are jostling for position ahead of the potential creation of a national mining champion to compete with global leaders such as BHP Billiton Plc/Ltd . Mr Morozov said Norilsk's management had requested talks with UC RUSAL about a merger after the aluminium firm made public statements of its intent eventually to unite with Norilsk after buying a 25-per cent-plus-two-shares stake in April. "Today we received a reply from RUSAL, saying they do not want to discuss this with the company's management, but that they want this issue sorted out with the new board after its election," Mr Morozov said. UC RUSAL issued a statement saying it did not believe the discussions of its plans with Norilsk's management would lead to a satisfactory conclusion for its and Norilsk's shareholders. "Balanced board" "At this stage, Norilsk Nickel management has tasks of higher priority to effectively manage the company," it said. "We are interested in creating a balanced board of directors that will represent the interests of all shareholders and which should consider and adopt the strategy of Norilsk Nickel, including the recent initiatives of different groups of the company's shareholders," it said. Norilsk, which supplies one-fifth of the world's nickel and over half its palladium, has a market capitalisation of $US51.7 billion is 30 per cent-owned by billionaire Vladimir Potanin. Potanin has also agreed to swap assets with Alisher Usmanov, founder of iron and steel firm Metalloinvest, in a deal that could either herald a three-way merger or thwart attempts by UC RUSAL to gain greater control over Norilsk. UC RUSAL produces 12 per cent of the world's aluminium and is controlled by Oleg Deripaska, Russia's richest man. Mikhail Prokhorov, the billionaire who sold his stake in Norilsk to UC RUSAL, received a 14 per cent stake in part-payment. Artyom Volynets, UC RUSAL Deputy chief executive for Strategy and Corporate Development, said last month his company supported a nine-member board with equal representation for Potanin's Interros group, UC RUSAL and independent directors. UC RUSAL has nominated four candidates to Norilsk's board: chief executive Alexander Bulygin, billionaire shareholder Viktor Vekselberg and Deripaska himself, as well as independent director Tye Burt, who is chief executive of Canadian miner Kinross Gold . UC RUSAL has also criticised Norilsk's management for the 12 per cent drop in 2007 net profit it reported last week -- a decline blamed by Norilsk on almost $US2 billion in write-offs associated with newly acquired mining and power assets. By Aleksandras Budrys of Reuters