Russian firm may acquire Aughinish Alumina

Aughinish Alumina could be taken over by Russian aluminium company Rusal as part of a deal that will create the world's largest producer of the metal.

Rusal is taking over Sual, its domestic rival, and the alumina assets of Glencore - the private Swiss group that owns Aughinish - in a $30 billion (€23.4 billion) deal.

The combined company will produce four million tonnes of aluminium and 11 million tonnes of alumina - the raw material for producing aluminium - annually.

Russia is short of alumina and the deal will give Rusal access to four alumina refineries in Europe and the West Indies.

Based near Foynes on the Shannon, Aughinish Alumina produced 1.8 million tonnes of alumina - the refined bauxite ore used to make aluminium - each year. It employs over 800 people and claims to contribute €100 million to the economy.

The combined company will be chaired by Brian Gilbertson, the head of Sual, and listed on the London Stock Exchange, according to a non-binding agreement signed by the three parties.

A person close to the deal said the memorandum was signed last Friday and the London listing is expected within three years.

The deal - which is still subject to due diligence - is believed to have been cleared by Russian president Vladimir Putin, and is expected to be announced by the end of September.

It will transform Rusal into the world's top aluminium company, overtaking Alcoa of the US.

It will reflect the growing presence of Russian metals companies in the international markets, and comes after the failed merger between Severstal, Russia's leading steel producer, and Luxembourg-based Arcelor.

Glencore is a private commodities trading group with a 36 per cent stake in Xstrata, the London-listed mining company.

Rusal will buy Glencore's alumina assets by issuing new shares and will own 64.5 per cent in the new company with Sual and Glencore owning 21.5 and 14 per cent respectively. However, Rusal will be able to buy out Glencore's stake within three years, according to the insider.

The acquisition would have no cash element and would be paid for entirely with Rusal shares.

Rusal is a private company controlled by Oleg Deripaska, a powerful Russian oligarch with family connections to former president Boris Yeltsin. The key shareholder in Sual is Victor Vekselberg, whose holding company owns a stake in TNK-BP, the Anglo-Russian oil group.

Rusal and Sual have been in talks for the past 18 months and Sual had previously said it was considering a London listing or attracting a strategic investor.

Rusal will appoint three directors with Sual and Glencore entitled to one executive director each. There will also be six independent directors. Rusal and Sual would not comment yesterday. - (Additional reporting Financial Times service)