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Metal giant's owners fail to divorce amicably

Russian billionaire, Mikhail Prokhorov, has gone public in his latest dispute with business partner Vladimir Potanin, revealing an ultimatum to buy his stake in holding company KM Invest within 30 days. The news came on the eve of a Friday deadline, by wh

Analysts say the row is not only damaging the company’s performance but that aluminium giant Rusal, not Potanin, will pick up the spoils.

Prokhorov's arrest over a prostitution racket in the French Alps is said to be the final straw in the spat between the fourth and fifth richest men in Russia. They’ve since stepped up talks to split their joint assets in some of Russia’s juiciest companies.

Now Prokhorov has given Potanin 30 days to buy his stake in KM-Invest holding, which owns 8% of the world leader Norilsk Nickel.

Senior analyst of Uralsib Bank, Michael Kavanagh says the long-running business divorce is hurting their companies’ operations.

“The uncertainty and potential difficulty of making decisions means that the day-to-day management of this company is essentially going to be on hold,” he said.

On Friday at 6pm Moscow time another deadline expires requiring Potanin to stump up the $US 15 billion cash if he wants Prokhorov’s 25% stake in Norilsk Nickel.

The Times of London claims the credit crisis prevented Citigroup raising the $US 10 billion the 46-year-old asked from them.

A separate document claims Rusal can buy Prokhorov's share for only $US 4.4 billion, plus an 11% stake in Rusal.

Metals specialist Tim McCutcheon says this makes the question not whether Rusal will get the 25% in Norilsk Nickel, but where it will stop.

“By using shares as an acquisition currency you can print as many shares as you want basically. But then no company wants to own 25% of something, this is just the first step in something else, whether that means the complete buy-out of Norilsk Nickel,” he said.

Norilsk Nickel's EBITDA (Earnings Before Interest Taxation Depreciation & Amortisation) works out around twice that of RusAl, leading some experts to suggest the mining company should be taking over the aluminium firm, not the other way round.

They see the state’s shadow in all of this, putting pressure on Prokhorov and Potanin to sell out because Rusal owner Oleg Deripaska is more faithful to the government.

Whatever the case may be, the purchase will further cement the Kremlin’s grip on what it sees as Russia’s strategic assets.