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By John Helmer, Moscow

Anonymous reports about Alisher Usmanov usually appear because he is selling or buying something, and wants to advertise his price. Or else they are there because Usmanov’s rivals and critics are at work. A report from London on Sunday that Usmanov is about to clinch a deal with the Japanese trader Mitsui is probably an advertorial.

A reporter at The Independent claims two anonymous sources have told him that Usmanov is about to sell a small shareholding in his Metalloinvest holding. The holding comprises two iron-ore mines, three steelmills, and one each of a bank, a scrap metal collector, an equipment leasing concern, and a rail transport company. Mitsui is reported by the Independent to be the buyer of a 10% piece of all this.

The advertisement appears to boost Metalloinvest’s share price ahead of an initial public offering (IPO). This, according to the newspaper, will now take place in 2011. Usmanov has been trying to list his shares in London for several years now, but he ran into delays with the Financial Services Authority (FSA), and then the loss of investor interest during the market crash of 2008-2009.

Usmanov holds a 50% stake in Metalloinvest; 30% is held by Andrei Skoch; and 20% by Vasily Anisimov. Skoch is the least well-known of the three, and thus of greater interest to potential investors and regulators. Anisimov made a fortune in aluminium smelters which he sold for $500 million to Victor Vekselberg in 2000, when they became part of the Siberian Ural Aluminium company (SUAL). Vekselberg wanted to include them in his London float, but was obliged by the Kremlin to merge them with Rusal, with well-known results.

Usmanov’s latest claim, according to the Independent, is that “selling a 10 per cent stake at $1.5bn-to-$2bn would value the group at $15bn-to-$20bn – though some experts believe that Metalloinvest could be valued as high as $30bn when it joins the London Stock Exchange in 2011. Such valuations would comfortably put Metalloinvest in the FTSE 100 index of biggest companies, where it would have access to major sources of capital. The sale of a minority stake to such a huge conglomerate as Mitsui would provide investors with confidence that Metalloinvest is worth the high valuations mooted.”

Mitsui is reportedly being advised by Lazard, and is saying nothing about this. Metalloinvest is reportedly being advised by the Bank of America Merrill Lynch. The report also claims that Usmanov has been talking for a year to Mitsui, and that he’s hoping for a deal by this Christmas. The reason for the delay, the sources claim, is that this is “the typical Japanese way of doing things.” Metalloinvest did not respond to requests for clarification.

Anisimov is better known in New York — where he and his family went after he sold out to Vekselberg — for how he spends his money rather than how he earns it. But on the topic of selling out of Metalloinvest he hasn’t needed to speak through anonymous sources. On Tuesday he told a Moscow business newspaper he feels old and tired, and wants to spend more time with his family. That’s the reason he claims he’s been offering to sell his 20% stake in Metalloinvest.

The trouble is, Anisimov hinted, he has yet to find a buyer at his price. “All assets are bought and sold,” he declared. “As of today, I have taken no definite decision on my bloc of shares of Metalloinvest, but I always think about my next steps. I am 59 years old and I work 18 hours a day. I wanted to spend more time with my family. We have discussed this issue [of the stake sale] with my partners [Usmanov and Skoch], the other shareholders of Metalloinvest. Between us, there is complete trust and understanding, which leaves each of us complete freedom of action.”

In the same report Usmanov’s spokesman responded: “Since this transaction didn’t materialize, I cannot comment on it.” But Anisimov’s failure so far to find his price was dismissed as a portent for the price at which Metalloinvest would like to sell to Mitsui, or to the London stock market. “I can tell you that Metalloinvest [is] a quality asset with great growth prospects,” the spokesman added. “I could only recommend the purchase of shares of such company.”

Anisimov’s hint that he has yet to find his price suggests the group may be in difficulty for reasons which have nothing to do with the Japanese national character. More likely, there is a reluctance in the market place to accept that Metalloinvest is worth $15 billion, let alone the $20 billion and $30 billion numbers the London newspaper was trying to promote.

The last time there was serious market discussion that Metalloinvest might be worth $15 billion was in February 2008, when the holding was declaring itself ready for a London IPO, and when it was in discussions with the FSA. At the time Usmanov claimed the holding should be valued at $20 billion. Uralsib Bank reported that a more reasonable range of value was between $15 billion and $19 billion. Then followed the autumn collapse of the steel and iron-ore markets, and Metalloinvest’s debts shot up to between $5 billion and $6 billion.

An announcement by the holding’s press office in June of this year said that business had been improving, enabling the group to pay off $1 billion in debt. That left $4.5 billion still owing, the press release claimed.

Because Metalloinvest remains private, there are no published financial reports to read, and no audited numbers for calculating fair value. A Moody’s ratings report, issued in July of this year, suggested the holding generated $4.8 billion in revenue in 2009, down 49% on the 2008 level, while earnings (Ebitda) came to $800 million. Applying the same multiple of enterprise value to earnings (EV/Ebitda) which Moscow industry analysts judged fit for Metalloinvest before the bust in 2008, the company would be worth between $4 billion and $6 billion.
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If Mitsui does the same sums on its abacus, it may be offering between $400 million and $600 million for a 10% stake; much less, if its interest is limited to the iron-ore mines, and not the remainder of the group’s assets. London IPO investors aren’t likely to offer more. If all Anisimov has been offered for his stake has been between $800 million and $1.2 billion, then it’s not difficult to understand why he and Usmanov may be feeling disgruntled.

Notwithstanding, this price range is almost exactly what one bidder in the London marketplace can afford to pay, if Metalloinvest’s iron-ore mines are what it wants. That’s the Vallar company, controlled by Nathaniel Rothschild (image) and his father, Jacob Vallar raised ₤687 million ($1.1 billion) at its IPO in July. UK and US sources expect Rothschild and his father to leverage this by four to five times, meaning they will try to borrow $4 billion to $5 billion. Adding the subscribed capital and the loans, Vallar is likely to have up to $6 billion in cash with which to buy its first asset. After the listing, Rothschild junior was quoted as saying he plans to use the funds raised to make a significant single investment in the mining sector. Depending on how much debt Vallar could raise, he also intimated that his target would be a company with an enterprise value of between ₤2 billion ($3.2 billion) and ₤5 billion ($7.9 billion). That price range is close to what the Metalloinvest properties are worth at the moment. Rothschild may try mollifying the Russians by adding Vallar shares to the cash in his takeover deal, thereby offering them the opportunity to slide into a listing on the London Stock Exchange without further ado from the FSA; and to erase the Russian risk discount from which they are suffering.

Iron-ore mines appear to be one of Vallar’s favoured targets, even though the company told share buyers at launch that “currently, there are no plans, arrangements or understandings with any prospective target business or company regarding such an acquisition.”

For the time being, there is no corroboration of the market speculation that Rothschild and Skoch are in a relationship already; and that Rothschild has been negotiating a cash and share deal with Usmanov. A spokesman for Vallar says: “We’ve got a policy of not commenting on deal speculation.” But has Rothschild been in communication recently with Anisimov? The spokesman replies: “no comment, I’m afraid.”

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