Deripaskas Rusal Tries to Contest Norilsk Nickel Minorities Buyback After the Fact

Deripaskas Rusal Tries to Contest Norilsk Nickel Minorities Buyback After the Fact

United Company Rusal, the metals conglomerate owned by Russian billionaire Oleg Deripaska, is attempting to reverse the buyback of Norilsk Nickel after the court order freezing the buyback had come too late.

When the minority shareholders of Norilsk Nickel confirmed a $2 billion buyout in August, Deripaska demanded a dividend payout instead. The controversial metals tycoon appealed to the Krasnoyarsk regional court and quickly secured a buyback freeze. But according to a statement issued by Norilsk Nickel, the company had already executed a 26 billion ruble ($1 billion) buyback before news of the freeze reached their Moscow headquarters in the afternoon of October 29.

The court order did take effect in time to prevent all of the minority shareholders from executing their buyback options, so the minorities have now threatened to file a countersuit against Rusal. Deripaska, meanwhile, threatens to take the buyback case to the Federal Financial Markets Service (Russia’s SEC) but experts predict this gambit will not succeed. Because the buyback had been partially executed before the freeze took effect, the minority shareholders are now in a strong legal position.

The dispute with Deripaska first caught the attention of the media earlier this month, when Western investors reacted to the global financial crisis by pulling their assets out of Russia. Michael Thompson, an analyst for the Russian Industrial Leaders Index (RUXX), explains how the Norilsk Nickel is illustrative of the larger economic climate in Russia:

“Because Western investors are often unfamiliar with the landscape of the Russian market, minority shares are the most common point of entry. The minority provides financing and hopes the local partners will move the business forward. But as soon as the minority shareholders’ rights are put at risk, they will pull out. Media and investors are monitoring the Norilsk Nickel situation with great interest.”

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