Norilsk votes in favour of $2 billion share buy back
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,”