- The Washington Times - Wednesday, August 6, 2008

MOSCOW | Billionaires Mikhail Prokhorov and Vladimir Potanin agreed to a $10 billion swap of cash and stock that may end an 18-month power struggle and resolve their dispute over Russia’s biggest gold and nickel companies.

Mr. Potanin will hand over $6.5 billion in cash and 35 percent of OAO Polyus Gold for Mr. Prokhorov’s 16.7 percent stake in OAO GMK Norilsk Nickel. Mr. Prokhorov’s stake in Polyus will increase to more than 60 percent, while Mr. Potanin will hold at least 47 percent of Norilsk, the largest mining company in Russia.

The agreement may end a dispute between Mr. Prokhorov, 43, and Mr. Potanin, 47, to split holdings that include Arctic nickel mines, gold deposits and real estate built up after the collapse of the Soviet Union. Mr. Potanin said he decided to end their business partnership after Mr. Prokhorov was arrested in January 2007 in the French ski resort of Courchevel on suspicion of pimping. He was later cleared.

The Norilsk shares Mr. Prokhorov has pledged to swap may be part of the 25 percent stake he sold earlier this year to United Company Rusal, said Rob Edwards, managing director of metals and mining at Moscow-based Renaissance Capital. Rusal controlling shareholder Oleg Deripaska, Russia’s richest man, said in April that he would seek to gain control of Norilsk.

“Rusal may have sold back some of its stake” to Mr. Prokhorov, Mr. Edwards said. “Rusal may have realized that it’s going to be very difficult to get control of this company, and that it’s just all got too messy.”

Mr. Prokhorov is “about to complete” the consolidation of his Norilsk stake, his holding company Onexim Group said Wednesday. The deal values Norilsk at $315 a share, 46 percent more than its closing price in Moscow on Tuesday. The deal should be completed by Nov. 15.

Mr. Potanin met Mr. Prokhorov in the early 1990s at a bank where they both worked. They formed the International Finance Co. and later Onexim Bank, which took part in state auctions of property in 1995 that raised cash for former President Boris Yeltsin’s government.

The deal between Mr. Prokhorov and Mr. Potanin may be part of a plan endorsed by Prime Minister Vladimir Putin to create a diversified mining company big enough to compete with BHP Billiton Ltd., said Stanislav Belkovsky, an independent political analyst who advised the Kremlin during Mr. Putin’s presidency.

“There’s pressure on Deripaska to join the consolidation project, but he’s hoping that in giving up part of Norilsk he can preserve Rusal as a separate entity,” Mr. Belkovsky said.

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