January 14, 2011 / 12:46 PM / 9 years ago

UPDATE 2-RUSAL takes legal action to halt Norilsk deals

* Latest salvo in battle for control of Norilsk

* Suits seek to annul $4.5 billion buyback, stake sale

* Cancellation of utility sale sought

(Adds analyst’s comment, share prices, details of buyback)

By Aleksandras Budrys

MOSCOW, Jan 14 (Reuters) - UC RUSAL (0486.HK), Oleg Deripaska’s aluminium major, filed lawsuits on Friday to annul three deals that would strengthen rival tycoon Vladimir Potanin’s hand in a battle for control of Russian mining giant Norilsk Nickel (NKELyq.L) (GMKN.MM).

The legal action marks the opening salvo of 2011 in a long battle for control of Norilsk, the world’s largest nickel miner. In December, Deripaska turned down a $13 billion offer by Norilks to buy out his 25 percent stake.

The Krasnoyarsk Arbitration Court said RUSAL had filed three cases, one demanding the scrapping of a $4.5 billion share buyback approved in December by Norilsk’s board. [ID:nLDE6BS0AA]

A second suit calls for the reversal of the sale of an 8.5 percent stake in Norilsk, effectively held in treasury, to trading house Trafigura. A third seeks the cancellation of the sale of utility OGK-3 OGKC.MM in an all-share transaction.

All three deals were opposed in board votes by Deripaska, who lacks sufficient representation to block major transactions.

RUSAL confirmed filing the cases but declined further comment.

“We have not received copies of the lawsuits and, as far as we know, the court has not taken a decision to examine them,” a Norilsk spokesman said when asked to comment on the lawsuits.

A special-purpose vehicle called Corbiere is the target of two of the lawsuits, while Norilsk is the target of the OGK-3 case. Interros, Potanin’s holding company which owns 25 percent of Norilsk, declined comment as it is not named in the cases.

RETURN TO TALKS SEEN

It was not immediately clear what Deripaska’s chances in court were, but he has suffered a series of setbacks since Potanin secured effective control over Norilsk at a disputed shareholder vote last May.

Analysts expect the two sides ultimately to return to the negotiating table to hammer out a deal for Norilsk to buy out Deripaska, who said in December he would only be willing to sell out for $16 billion. [ID:nLDE6BT0ET]

Even if he fails to secure that asking price, a deal to sell out would more than cover RUSAL’s debts less than two years after the aluminium major won a life-saving restructuring deal.

“Both parties are playing hardball. Lawsuits are one weapon in the hands of RUSAL, although their merit doesn’t seem particularly robust,” said Mikhail Stiskin, an analyst at Moscow brokerage Troika Dialog.

“Talks can resume at any time. Norilsk is still interested.”

Norilsk ADSs traded flat on Friday at $24.70, recovering from earlier losses after CEO Vladimir Strzhalkovsky told Prime Minister Vladimir Putin at a meeting that net profit surged to over $5 billion last year. [ID:nLDE70D14V]

RUSAL shares, which rallied in December on speculation of a buyout deal, gained 0.7 percent to $11.72.

VALUE DESTRUCTION

Copies of the RUSAL lawsuits made available to Reuters call the share buyback “an invalid, one-sided transaction” that “seeks to circumvent the imperative norms of Russian law and violates the rights of Norilsk shareholders.”

They argue the share buyback and the prior sale of stock to Trafigura were value-destructive because the buyback, at $25.20 per American Depositary Share, was dearer than the prior stock sale to Trafigura, done at $21.80 per ADR.

There was no evidence Trafigura had paid for its stake yet, said RUSAL, which contended Potanin was heading a consortium of investors that had increased its joint stake in Norilsk to more than 30 percent, a key threshold in Russian corporate law.

In the third lawsuit, RUSAL argues the OGK-3 sale caused an unnecessary loss, was priced at a discount to the market and failed to take account of a better offer from Eurosibenergo, a company controlled by Deripaska. (Additional reporting and writing by Douglas Busvine; Editing by David Cowell)

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