Norilsk votes in favour of $2 billion share buy back

Norilsk Nickel is launching a share buy back programme worth two billion dollars.

The company's board of directors decided to repurchase almost 8 million shares, or 4% of its stock, in a move to raise its capitalization.

In a statement new Norilsk Nickel CEO Vladimir Strzhalkovsky emphasised the company’s growth potential and managements determination to maximise this, while noting the share price has been down.

“Norilsk  Nickel  intends  to  buy  back its own shares in order to support the company's securities, which went down in price significantly in the last  several  months.  This  price  drop  was impacted mostly by factors that are irrelevant to the company's fundamentals,”

However, Rusal, which owns 25% of Norilsk Nickel, voted against the proposal. It said funds not used in investment programmes should be distributed among all shareholders via dividends, while the buy back may infringe the rights of minority shareholders.

“UC  Rusal  has  consistently  advocated  that  funds  not  used in investment programs should be distributed among all shareholders by way of a dividend.  We believe that a dividend payment is the most effective form of using unallocated cash funds in  the  interest  of  all shareholders. Furthermore a dividend payment would not infringe upon the rights of minority shareholders who  have  no intention to sell their shares,”

Analysts were generally upbeat about the implications of the buyback for minority shareholders. Marat Gabitov of Unicredit Aton noted

“This  is  very good for minority shareholders. The premium is 26%. We must take into account that this buyback is proportional.  In addition, one must understand that Rusal, Interros and, possibly someone else we don't know about, will not sell their shares. That is, the real free float is now 45%, but 35-40%. Since they won't sell their shares, minority shareholders will have far more opportunity to sell them,”

Uralsib analyst Dmitry Smolin was more tempered, adding,

“Minority shareholders are happy, but the effect will be minimal. Since the 25% premium makes the buyback attractive for many, the number of tendered  shares will probably exceed 4% and shareholders will probably be unable to sell all shares, only a small portion,”