Rusal Has $15 Billion Norilsk Stake, Rothschild Says

Dec. 24 （Bloomberg） -- United Co. Rusal’s stake in OAO GMK Norilsk Nickel is worth at least $15 billion, said Nathaniel Rothschild, chairman of the holding company for billionaire Oleg Deripaska’s Rusal shares. That’s $3 billion more than Norilsk bid for the stake last week.

The 25 percent of Norilsk that’s held by Rusal is worth “conservatively $15 billion, and arguably a great deal more,” Rothschild, chairman of EN+ Group, said in an e-mail.

Norilsk, the world’s biggest nickel producer, offered $12 billion to Rusal on Dec. 16 to buy back its shares. Rusal’s exit could bring an end to a long-running feud between Deripaska and fellow Norilsk shareholder Vladimir Potanin over company strategy, Nomura Holdings Plc said last week.

Rusal, which initially rebuffed Norilsk’s proposal, said Dec. 22 that its directors would study the offer. The aluminum producer may sell the shares at $12 billion to $15 billion, billionaire Mikhail Prokhorov, who holds 17 percent of the company, told Vedomosti newspaper on Dec. 20.

Norilsk is studying a possible stock buyback from minority owners in the event that Rusal rejects the bid, Erzhena Mintasova, a Norilsk spokeswoman, said after the management board held a meeting in Moscow late yesterday.

Earnings Outlook

Norilsk should “comfortably” produce $9 billion to $10 billion in earnings before interest, tax, depreciation and amortization next year, Rothschild said yesterday. “On an even modest multiple of six, the business is worth $54 billion to $60 billion,” he said.

A Bloomberg survey of analysts shows Norilsk may report Ebitda of $7.15 billion this year and $7.63 billion in 2011, according to the median of 12 estimates.

“Norilsk is trading at an approximate 40 percent to 45 percent corporate-governance discount,” Rothschild said.

Rusal has sought to replace Norilsk Chief Executive Officer Vladimir Strzhalkovsky and the company’s board. Yesterday, Rusal requested a meeting of Norilsk shareholders to elect new directors after the nickel producer agreed to sell an 8 percent stake to Trafigura Beheer BV without board approval.

At least one other party has approached Norilsk’s independent directors to buy those shares at a “significant premium” to the market price, Rothschild said, without identifying the company. Norilsk’s Mintasova wasn’t immediately available to comment.

--Editors: Amanda Jordan, Alastair Reed