Norilsk Nickel buyback needs approval of foreign investment commission - regulator
(adds FAS comments in paragraphs 3 and 4, quote by Norilsk Nickel in penultimate paragraph)
MOSCOW. Oct 12 (Interfax) - The share buyback by MMC Norilsk Nickel needs to be approved by the government commission for oversight of foreign investment, Federal Anti-Monopoly Service (FAS) head Igor Artemyev said in a letter to the mining company's chief executive Vladimir Strzhalkovsky, a representative of Norilsk Nickel told Interfax.
FAS sent the same letter to Norilsk Nickel's largest shareholders, Interros and Rusal. A representative of Rusal confirmed that the company had received such a letter, but declined to comment.
A highly placed FAS official told Interfax that the regulator had begun to analyze the buyback. "We have to analyze the deal, the structure of the shareholders, and study the issue thoroughly. The FAS has already begun the analysis," the official said, without specifying when a final decision would be ready.
If the FAS deems the buyback is being conducted in violation of the law, its decision will have to be endorsed by a court.
Norilsk Nickel claims that buyback is not under any threat. "The implementation of the buyback program is currently proceeding in full, according to the previously announced parameters," the Norilsk Nickel representative said.
Rusal reckons that the buyback could be declared void if it is not endorsed by the government commission. "The FAS letter confirms that the buyback can only be carried out with the permission of the government commission. Without this permission, any Norilsk Nickel deals on the buyback are void," a Rusal representative said.
Norilsk Nickel subsidiary NN Investment plans to acquire 7.71% of Norilsk stock in the course of the buyback from September 28 to October 28. Another 9.23% of Norilsk shares, bought in a previous buyback, are held by another subsidiary, Corbiere Holdings. By law, the approval of the government commission is required if ownership in a strategic Russian company by entities from a foreign jurisdiction exceeds 10%.
However, FAS is not merely concerned that the foreign subsidiaries of Norilsk Nickel will exceed the 10% ownership threshold - the regulator thinks that Norilsk Nickel and its largest shareholder Interros comprise one group of entities.
This view was previously voiced by Rusal. The aluminum company's deputy chief executive Maxim Sokov, who sits on the board of directors of Norilsk Nickel, said that "even the previous buyback in 2011 required the approval of the government commission, as [Interros head] Vladimir Potanin and Norilsk Nickel form a single group of entities, and they have already long ago passed the 10% barrier." Regardless of which subsidiary formally holds part of the shares, the stake of the group of entities as a whole is considered, Sokov said.
Sokov said that NN Investments' memorandum should have mentioned the risk related to the possible review of the buyback by the government commission.
Rusal initiated the clarification of this issue, Norilsk acknowledged. In addition, Norilsk Nickel itself wanted to clarify the competition regulator's position on whether FAS and consequently the government commission, which reviews deals on the basis of FAS materials, considers Norilsk and Interros to be a single group of entities.
"The letter does not contain any demands and is just part of the correspondence between the company and FAS, begun in August 2011 at the requests of Rusal and Norilsk Nickel itself," the Norilsk representative said. The regulator's position on whether the companies constitute one group of entities has not yet been defined according to the requirements of the Law On Protection of Competition, he said.
"The company's legal position about the absence of a group of entities is confirmed by the opinions of research institutes in the area of Russian law. The company again intends to send a response to the message received from FAS, laying out the arguments substantiating its position," the Norilsk representative said.
If Norilsk Nickel is forced to seek the government commission's approval for the buyback, the deal could be delayed considerably as the commission, headed by Prime Minister Vladimir Putin, meets once a quarter. The commission had its last meeting at the end of August.
Norilsk Nickel told Interfax on Wednesday evening that it had "worked out a mechanism" to ensure group members do not exceed the 10% threshold as the result of the buyback.
Interros controls about 30% and Rusal - 25.13% of Norilsk Nickel. Metalloinvest owner Alisher Usmanov owns 4% but plans to increase his stake to 5%. Norilsk Nickel subsidiary Corbiere Holdings currently holds 9.23% in Norilsk Nickel stock. According to official information, 8% of Norilsk Nickel's shares have been sold to companies affiliated with Dutch commodities trader Trafigura, but the latter has not acknowledged being the ultimate beneficiary in those deals. The shareholder structure will change after the buyback, as Norilsk Nickel plans to cancel the shares and ADR it acquires.