Russian metals merger plans abandoned after Medvedev meeting

Following a meeting with Russian President Dmitry Medvedev, shareholders of major Russian metal and mining companies have abandoned their merger plans for the Russian metals industry, business daily Vedomosti reported Friday, citing sources close to the businessmen.

On Thursday Medvedev had a 40-minute meeting with Norilsk Nickel’s chief executive, Vladimir Strzhalkovsky; UC Rusal’s major shareholder and chief executive, Oleg Deripaska; and Vladimir Potanin, a major shareholder of Norilsk Nickel, according to a Kremlin spokeswoman.

Explaining the decision to abandon the merger plan, a source close to Norilsk Nickel said that the company has enough cash flow and a relatively small debt and should not solve problems of other companies at its own expense.

The agenda of the meeting also included government purchases of metals, the daily reported.

The idea to merge Norilsk Nickel with metals holding Metalloinvest was put forward at a meeting of Potanin, Deripaska, and Metalloinvest’s controlling shareholder Alisher Usmanov with President Medvedev in January. Under the proposal made by Usmanov, the government would have received a 25% in the merged company as a result of repayment of the companies' debts worth U.S. $10 billion — $12 billion. Usmanov and his business partners would have received a 27.8% stake, and UC Rusal and Potanin would have got 12.5% each.

Potanin’s Interros owns 30%in Norilsk Nickel, and United Company Rusal, which is controlled by Deripaska, owns 25%.

Subsequently UC Rusal and Potanin rejected the proposed distribution of shares, which would have stripped them of control over the holding, and put forward their own plans for the merger.

Initially, they proposed that steelmaker Evraz Group, fertilizer producer Uralkali, coal producer Mechel, titanium producer VSMPO-Avisma also merge with Norilsk Nickel and Metalloinvest. State-owned industrial conglomerate Rostekhnologii was supposed to get a 25% in the future holding in exchange for repayment of the companies' debts by the government.

Later merger plans have been refined further Then the scheme was changed. Shareholders suggested including oil company RussNeft and coal producer Raspadskaya in the holding instead of Mechel and Evraz Group.