Rusal to buy into Norilsk Nickel

Vladimir Potanin, billionaire and co-owner of Norilsk Nickel, says he will not buy out Mikhail Prokhorov's 25% of the company. Instead, United Company Rusal, owned by Oleg Deripaska, says it will create “Russia’s first global diversified metals and

Easier terms

Rusal's claim came minutes after the other bidder, Prokhorov’s former business partner, Vladimir Potanin, confirmed he would not be able to meet the “unrealistic” price demands of some $US 15 billion in cash.

The two businessmen have been separating their assets all year, with many seeing personal reasons behind the split.

Rusal received far easier terms from Prokhorov of 11% of Rusal shares plus an undisclosed cash amount, estimated at between $US 4 and 8 BLN.

After the announcement Norilsk Nickel CEO, Denis Morozov, denied earlier allegations that the rift between its owners was hurting the performance of the firm. The news comes on the back of increased global competition, as the likes of world mining leader BHP Billington and rival RioTinto look to unite.

It remains to be seen whether Rusal will use Norilsk Nickel’s purchase as a cash cow, or create a powerful rival to the multinational miners being carved out worldwide.

However, analysts say Rusal won’t find it easy to incorporate a firm twice its size with no obvious synergies. Dmitry Kolomystyn, Senior Analyst for UniCredit Aton, reminded RT that Rusal is not 100% vertically integrated in energy, while energy is more than 30% of its costs.

Norilsk Nickel energy assets were supposed to be spun off recently into Energopolyus, which didn't happen, as Prokhorov went against the spin-off.

Potanin’s Interros holding will retain his 25% stake in Norilsk Nickel. A spokesman for Interros said they're comfortable with the entry of the aluminium giant as their new partner. He also claimed they were unconcerned by the general consensus that Rusal will now move to buy out the rest of the nickel giant.

A grand business divorce

It was some 16 years back when influential banker Vladimir Potanin spotted the talent of financial whizz-kid Mikhail Prokhorov.

In the 90s the duo built a business empire from scratch, snapping up Norilsk Nickel, Russia's largest nickel company. It was a partnership based on friendship and equality. Both owned half the company and got half the profits.

So how, after such a long-term alliance, has it turned so bitter?

In the early days, the sparks between them built an empire, but analysts say their previously strong links have been eroded.

Kolomystyn believes it's down to a clashpersonalities .

“They have different views, it's like the Beatles, you know, I guess they've overgrown the status of group players, they want to be individual players,” Kolomystyn said.

Potanin, who's 46, was once Deputy Prime Minister to Yeltsin. He's a traditionalist at heart, a family man, a religious man, a man who set up a charity and is known as a philanthropist. Potanin believes “a difference in personality can be a reason to divide a business”.

In contrast, playboy Prokhorov is Russia's most eligible bachelor. This reputation was cemented last January, when French police arrested him in the ski resort of Courchevel during an investigation into an international prostitution ring. Although released without charge, the incident didn't please his respectable colleague.

Commenting on media speculation that he's had major disputes with his partner, Prokhorov blamed the press for exaggerating them, but still wanted to cut his ties.

On the blog site LiveJournal, Prokhorov said he and Potanin had achieved so much together and had grown together. But, he added, their visions for the company's future are now incompatible.