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14 Dec, 2007 16:47

Norilsk Nickel could not split with its energy assets

Norilsk Nickel shareholder Mikhail Prokhorov has blocked a plan to spin off the metals giant’s energy assets into a separate entity. Until Prokhorov’s stake is sold, their fate remains in balance.

Minority shareholders turned up to vote in Friday's Extraordinary General meeting, but it was a wasted effort.

Prokhorov – who directly owns 25% plus one share in Nornickel – announced earlier in the day that he would not participate.

As a spin-off needs the backing of 75% of the share holding, Prokhorov's action rendered the vote redundant.

Norilsk Nickel CEO Denis Morozov exclusively told Business Today that from now on his company will consider different options, including selling of the assets.

“The spin off idea was approved in May by the board of directors anonymously, also including Mr Prokhorov. Basically, the board of directors set up a game plan for the management to go forward and make it happen. Today we did not get 75% of the votes because [he] blocked the spin-off. But the management still believes that the spin-off of non-core energy assets is the best way to unlock their value towards shareholders,” Morozov said.

A $US 50 billion asset

Norilsk is the world's largest nickel and palladium producer, worth around $US 50 billion.

It seems, Prokhorov believes its energy assets don't add up to much on their own. But his blocking role in company strategy is set to end shortly.

He and Vladimir Potanin – who owns around a quarter of Norilsk Nickel – announced their intention to split all their joint assets at the beginning of the year.

Earlier this month, Prokhorov offered a 25% plus one share stake in Norilsk to Potanin for $US 15.7 billion. The huge amount of money involved helps explain why it has taken them so long to get this far.

The clock is ticking now for Potanin. He has to accept or decline Prokorov's offer until December 21.

If he doesn't stump up the cash, the aluminum giant Rusal is prepared to take the stake off Prokhorov's hands in exchange for an 11% share in Rusal, along with an unspecified amount of cash.

Sources close to Rusal say the company's management would like to see the energy assets remain integrated in any new holding.

So, even when Prokhorov makes his exit, Norilsk's energy assets may not be going anywhere.

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