Russian firm to be worlds No. 1 maker of aluminum

The Russian aluminum company Rusal on Monday announced a three-way merger to create the world’s biggest aluminum producer, dethroning the U.S. aluminum maker Alcoa and underscoring the rise of Russia’s commodity-based industries against a backdrop of rising prices.

Under the terms of the agreement, Rusal, which is controlled by the Russian billionaire Oleg Deripaska, will issue new shares to acquire its Russian rival Sual as well as the alumina assets of the Swiss commodities trader Glencore.

Sual would hold 22 percent and Glencore and 12 percent stakes in the new company, said Sual’s chairman, Viktor Vekselberg.

He said he expected the new company to carry out an initial public offering of about 20 percent of the company in less than 18 months, most likely in London.

The expanded Rusal would produce nearly four million tons of primary aluminum a year, eclipsing the 3.55 million tons that Alcoa reported in 2005.

Analysts have said that the three companies complement one another perfectly: Sual has large holdings of bauxite, aluminum’s raw material. Rusal, meanwhile, has the biggest smelters and access to cheap electricity – the main cost in the business. As such, the deal essentially reunites Russia’s aluminum industry after it was carved up in the privatizations of the 1990s after the Soviet Union collapsed.

Although the merger involves two privately held Russian companies, analysts said, it nonetheless is consistent with President Vladimir Putin’s vision for the economy.

“With the extractive industries, the Kremlin clearly favors consolidation and for Russian companies to become bigger global players,” said Chris Weafer, chief strategist for Alfa Bank in Moscow.

“That allows Russia to enjoy the economic benefits of size and also gives the Kremlin political leverage.”

Putin, who approved the deal in August, has been consolidating the energy and metals industries under companies aligned with the government.

“The Rusal merger is a key step as Deripaska seeks to properly price and protect valuable assets by creating a national champion, and he can’t do something like that without Putin’s involvement,” said James Fenkner of Red Star Asset Management in Moscow.

Putin met Deripaska in early August.

Russia’s business elite regularly meet with Putin to discuss their development plans and garner approval from the man who rules the nation from his office in the Kremlin.

Vekselberg, the owner of Susal, met Putin at the Black Sea resort of Sochi on Sept. 13 and discussed the Rusal merger talks. Vekselberg also thanked Putin for his support of projects in Africa and discussed business plans inside Russia, including a venture to build housing for more than 300,000 people in the Sverdlovsk region, near the Ural Mountains.

Putin is using cash from record oil prices to increase Russia’s industrial power and bolster state control of key industries.

Oil and gas assets are being consolidated into Gazprom and Rosneft while the state-owned weapons exporter Rosoboronexport said Aug. 12 that it had agreed to buy VSMPO-Avisma, the world’s biggest titanium producer.

MOSCOW The Russian aluminum company Rusal on Monday announced a three-way merger to create the world’s biggest aluminum producer, dethroning the U.S. aluminum maker Alcoa and underscoring the rise of Russia’s commodity-based industries against a backdrop of rising prices.

Under the terms of the agreement, Rusal, which is controlled by the Russian billionaire Oleg Deripaska, will issue new shares to acquire its Russian rival Sual as well as the alumina assets of the Swiss commodities trader Glencore.

Sual would hold 22 percent and Glencore and 12 percent stakes in the new company, said Sual’s chairman, Viktor Vekselberg.

He said he expected the new company to carry out an initial public offering of about 20 percent of the company in less than 18 months, most likely in London.

The expanded Rusal would produce nearly four million tons of primary aluminum a year, eclipsing the 3.55 million tons that Alcoa reported in 2005.

Analysts have said that the three companies complement one another perfectly: Sual has large holdings of bauxite, aluminum’s raw material. Rusal, meanwhile, has the biggest smelters and access to cheap electricity – the main cost in the business. As such, the deal essentially reunites Russia’s aluminum industry after it was carved up in the privatizations of the 1990s after the Soviet Union collapsed.

Although the merger involves two privately held Russian companies, analysts said, it nonetheless is consistent with President Vladimir Putin’s vision for the economy.

“With the extractive industries, the Kremlin clearly favors consolidation and for Russian companies to become bigger global players,” said Chris Weafer, chief strategist for Alfa Bank in Moscow.

“That allows Russia to enjoy the economic benefits of size and also gives the Kremlin political leverage.”

Putin, who approved the deal in August, has been consolidating the energy and metals industries under companies aligned with the government.

“The Rusal merger is a key step as Deripaska seeks to properly price and protect valuable assets by creating a national champion, and he can’t do something like that without Putin’s involvement,” said James Fenkner of Red Star Asset Management in Moscow.

Putin met Deripaska in early August.

Russia’s business elite regularly meet with Putin to discuss their development plans and garner approval from the man who rules the nation from his office in the Kremlin.

Vekselberg, the owner of Susal, met Putin at the Black Sea resort of Sochi on Sept. 13 and discussed the Rusal merger talks. Vekselberg also thanked Putin for his support of projects in Africa and discussed business plans inside Russia, including a venture to build housing for more than 300,000 people in the Sverdlovsk region, near the Ural Mountains.

Putin is using cash from record oil prices to increase Russia’s industrial power and bolster state control of key industries.

Oil and gas assets are being consolidated into Gazprom and Rosneft while the state-owned weapons exporter Rosoboronexport said Aug. 12 that it had agreed to buy VSMPO-Avisma, the world’s biggest titanium producer.

MOSCOW The Russian aluminum company Rusal on Monday announced a three-way merger to create the world’s biggest aluminum producer, dethroning the U.S. aluminum maker Alcoa and underscoring the rise of Russia’s commodity-based industries against a backdrop of rising prices.

Under the terms of the agreement, Rusal, which is controlled by the Russian billionaire Oleg Deripaska, will issue new shares to acquire its Russian rival Sual as well as the alumina assets of the Swiss commodities trader Glencore.

Sual would hold 22 percent and Glencore and 12 percent stakes in the new company, said Sual’s chairman, Viktor Vekselberg.

He said he expected the new company to carry out an initial public offering of about 20 percent of the company in less than 18 months, most likely in London.

The expanded Rusal would produce nearly four million tons of primary aluminum a year, eclipsing the 3.55 million tons that Alcoa reported in 2005.

Analysts have said that the three companies complement one another perfectly: Sual has large holdings of bauxite, aluminum’s raw material. Rusal, meanwhile, has the biggest smelters and access to cheap electricity – the main cost in the business. As such, the deal essentially reunites Russia’s aluminum industry after it was carved up in the privatizations of the 1990s after the Soviet Union collapsed.

Although the merger involves two privately held Russian companies, analysts said, it nonetheless is consistent with President Vladimir Putin’s vision for the economy.

“With the extractive industries, the Kremlin clearly favors consolidation and for Russian companies to become bigger global players,” said Chris Weafer, chief strategist for Alfa Bank in Moscow.

“That allows Russia to enjoy the economic benefits of size and also Oil and gas assets are being consolidated into Gazprom and Rosneft while the state-owned weapons exporter Rosoboronexport said Aug. 12 that it had agreed to buy VSMPO-Avisma, the world’s biggest titanium producer.