[Asia Economy Reporter Park Byung-hee] Russia is pushing for a merger of large metal companies to enhance its ability to counter Western sanctions.
Major foreign media reported on the 5th (local time) that Norilsk Nickel (Nornickel), Russia's largest nickel producer, and Rusal, an aluminum producer, have begun merger discussions.
Vladimir Potanin, the largest shareholder holding 36% of Nornickel shares, stated that Rusal proposed the merger discussions and he agreed. Potanin explained that the reason for accepting the merger talks was to add stability in response to Western sanctions imposed after Russia's invasion of Ukraine and to diversify Nornickel's shareholder base.
If Nornickel and Rusal merge, the world's largest raw materials company with a market capitalization of $60 billion (approximately 78.402 trillion KRW) will be created. This surpasses the market capitalization of Glencore, currently the world's largest mining and raw materials trading company, which stands at $55 billion.
Nornickel is an important material supplier to the automotive industry. It produces not only nickel, a key material for electric vehicle batteries, but also palladium, which is used as a catalyst in carbon emission reduction devices for internal combustion and hybrid vehicles. European stainless steel producers also purchase a large amount of nickel from Nornickel. Rusal is also one of the world's largest aluminum suppliers and counts many Western automotive and aerospace companies among its clients.
Analysts expect that while the synergy from the merger may not be significant, it will become more difficult for the West to inflict damage through sanctions.
Rusal acquired Nornickel shares 14 years ago and currently holds about 26% of the shares. Kirill Chuko, an analyst at BCS Global Markets, predicted that considering the current stock price, Potanin and Rusal would hold 28% and 25% of the merged company’s shares, respectively.
Nornickel is among the highest dividend-paying companies in the mining sector. Potanin and Rusal have repeatedly clashed over the high dividend policy.
However, Potanin stated that maintaining continuous production and fulfilling obligations to the state and employees are most important now, and that the high dividend policy cannot be maintained going forward. The current high dividend policy is scheduled to end by the end of this year.
Rusal was subject to U.S. sanctions from April 2018 to 2019. At that time, aluminum prices surged due to supply disruptions. After Rusal’s founder Oleg Deripaska stepped down from management, Rusal was removed from the U.S. sanctions list. Deripaska remains under U.S. sanctions.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
