Prokhorov sells 7% another of Rusal for $504 mln
MOSCOW. Aug 11 (Interfax) - Sual Partners Limited has bought 7% of shares in UC Rusal from billionaire Mikhail Prokhorov for $503.89 million, increasing its stake in the Russian aluminum giant to 22.8% from 15.8%, Rusal reported to the Hong Kong Stock Exchange.
Shares in Rusal initially fell nearly 5% on the Hong Kong exchange, responding to discount at which Prokhorov sold the shares, but they then pared those losses, trading down 3.6% by noon Moscow time.
Zonoville Investment, which is affiliated with Sual Partners, is acquiring 1.06 billion common shares in Rusal from Prokhorov's Dimosenco Holdings, the aluminum company said. The deal will make it possible to preserve the shareholder agreement between Rusal's biggest shareholders.
Prokhorov sold 3.32% of shares in Rusal on the open market in the middle of February for $240 million.
Rusal's biggest shareholder is Oleg Deripaska, who controls 48.13% through En+. Prokhorov's stake in the company has fallen to 6.7% following the latest sale.
The price
Prokhorov sold the latest 7% of Rusal at HK$3.7 a share - the same price at which his Onexim Group sold the 3.32% in February - implying a discount of 30% on Rusal's closing price of HK$5.29 on Thursday.
BCS said it thought the price had been pre-arranged and "might be related to Onexim's strong desire to sell the shares and with the recent rally in Rusal's share price," which has jumped 33% since June 11.
But the low sale price and the decision to sell at a time when aluminum is on the up are a downside for Rusal's shares, said the Aton investment company.
BCS analyst Kirill Chuiko said he was not inclined to link the recent growth in Rusal's share price with inside information about a deal between Onexim and Sual Partners. "Rusal's shares have long been undervalued. Meanwhile, aluminum prices have strengthened, the ruble has weakened and Nornickel's shares have gone up, by 12% since June 1. In other words, the growth for Rusal's shares is a somewhat belated reaction to the upside," Chuiko said.
Sergei Donskoi of Societe Generale agreed, saying that other aluminum stocks such as Chalco had also rallied had also rallied. "The fact this happened at the same time as the deal might have been a pure coincidence," he said.
The consequences
BCS said one consequence of the deal might be escalation of the conflict between Rusal's shareholders. "[Viktor] Vekselberg clearly didn't buy [some of Onexim's stake] just for any reason - he might have some Napoleonic plans. He did at one time campaign for the stake in Nornickel to be sold and for higher dividends to be paid," Chuiko said.
But nothing has changed strategically - Oleg Deripaska still controls Rusal and there are no signs yet that the situation at the company will escalate into anything like the shareholder dispute at Nornickel in 2008-2012, he said.
Renaissance Capital also said the deal strengthened the hand of Sual Partners, which in its time had wanted to monetize Rusal's 27.8% stake in Nornickel.
BCS thinks a potential shareholder conflict would be good for minority shareholders. Sual Partners would push for higher dividends from Rusal. Renaissance Capital reckons Rusal's financial performance - FCF guidance is $1.207 billion in 2017 and $1.811 billion in 2018 and net debt/EBITDA, re-calculated according to a new method, is 1.9x - looks quite conducive to the payment of substantial dividends.
The analysts think the prospect of Onexim selling the rest of its stake will also benefit Rusal's shares. BCS thinks this will happen in the medium term - Onexim and Sual Partners had an agreement in 2016 for the sale of the whole 17% stake for $1 billion. Renaissance Capital also said Onexim could well lower its stake in Rusal further,
Aton thinks the potential sale of the Onexim stake might create a market overhang of Rusal shares. Renaissance Capital thinks that the overhang might disappear if the remainder of the shares are sold to portfolio investors, in which case Rusal could be added to the MSCI Russia index and see $680 million-$730 million flow into its shares from passive and active investors.
