Norilsk and Rusal in talks to forge €58.5bn Russian metals champion

Nickel and aluminium producers say combination would give groups ‘extra stability against sanctions’

Norilsk Nickel has started talks with Rusal – the parent of Aughinish Alumina – over a deal to forge a $60 billion (€58.5bn) industrial metals champion better positioned to withstand the impact of western sanctions on Russia.

Vladimir Potanin, the billionaire businessman who controls more than a third of Norilsk, said he had agreed to discussions following an approach from the Moscow-based aluminium producer.

He cited the need to “acquire extra stability against sanctions” after Russia’s invasion of Ukraine, something that could be achieved by “further” diversifying Norilsk’s shareholder base. Mr Potanin controls almost 36 per cent of Norilsk through his company Interros, while Rusal has a near 26 per cent stake.

“The latest offer we got from Rusal was to discuss the merger of Norilsk Nickel and Rusal,” Potanin told Russian business channel RBC on Tuesday. “We have reconsidered the idea...because this allows [us] to create a national champion. ”

A merger of the two companies would create one of the biggest metal producers in the world, with a combined equity market value of $60 billion. To put that figure in perspective, miner and commodity trader Glencore is valued at $55 billion.

Norilsk is a crucial supplier to the automotive industry, producing nickel for electric vehicle batteries, as well as palladium for the catalytic converters that limit harmful emissions in petrol and hybrid cars. Europe’s stainless steel industry is also a big buyer of its nickel.

Rusal is the largest supplier of aluminium outside of China, and its metal is used by western carmakers as well as the aerospace industry.

After the news of the merger discussions, shares in Rusal rose 5 per cent while those in Norilsk declined 11 per cent on fears its generous dividend policy would be changed.

While there would be few industrial synergies from a merger, analysts said the combined entity would be harder to hit with sanctions. “The parties have a long and extremely difficult history of relations, while business-wise the merger makes limited sense from synergies perspective,” Kirill Chuyko, analyst at BCS Global Markets, said.

Rusal purchased its stake in Norilsk 14 years ago and has repeatedly clashed with Mr Potanin over issues including the company’s dividend policy. – Copyright The Financial Times Limited 2022