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7 Aug, 2008 02:50

Source of Prokhorov’s new Norilsk shares under question

Russian billionaire, Mikhail Prokhorov is ready to sell a 16.6% stake in Norilsk Nickel to his former business partner Vladimir Potanin. His Onexim group is effectively taking up a binding offer which Potanin made in November. It gives Prokhorov a nearly

The market is puzzled where Prokhorov got this latest 16.6% stake in NorNickel. The Russian billionaire sold all his shares in the company last May – mostly to aluminum producer Rusal. On the other hand, Prokhorov could not have bought the shares in the market without being noticed – such a large purchase would have pushed up the share price significantly.

Maxim Khudalov of Metropol investment has another version – NorNickel’s minority shareholders are ready to sell.

«$315 per share is a huge upside compared to the current market price. It’s like 43% higher. So at this price, I believe, there are plenty of investors who are eager to sell Norilsk Nickel, given the current increased political risk in Russia.  People would be eager to sell shares at such a huge premium.»

Others say such a huge premium to the market price could even motivate Rusal to sell part of its holding.  Rusal’s position in Nornickel was undermined after Potanin became the company’s chairman and his candidate was elected as CEO. Aleksandr Pukhaev of VTB Investment says no matter who owns the shares, its a profitable opportunity for Prokhorov to play the middleman.

“Prokhorov right now is very much in an investment business, and if it works out he basically buys the company at a relatively low level, because Norilsk Nickel has not been at this level for some time, and sells at nearly 50% higher. 

The purchase will boost Potanin’s share in NorNickel above 30% and under the law he must now offer to buy out minority shareholders.
At a $315 a share, that would cost Potanin $25 Billion – a sum that during a credit squeeze is almost impossible to raise.