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By John Helmer, Moscow

The disclosure that Alisher Usmanov has recently made a secret agreement with Oleg Deripaska to achieve improved corporate governance at Norilsk Nickel is more revealing than Usmanov intends to let out – but that additional revelation isn’t difficult to guess.

According to a press statement by Usmanov and brokerage reports in Moscow, ahead of last Friday’s vote of shareholders on a new board of directors for Norilsk Nickel, “the shareholders of Metalloinvest and Rusal have agreed on joint action in matters relating to the development of Norilsk Nickel. We support the policy of improving the efficiency of company management in the interests of all shareholders of [Norilsk Nickel], and not one of them.” The statement appears in Monday’s Kommersant, a Moscow newspaper which Usmanov owns.

The negative reference to one shareholder is a swipe at the Interros holding of Vladimir Potanin, whose alliance with the Norilsk Nickel management has prevented a hostile takeover of Norilsk Nickel by the Deripaska forces. Officially, the shareholder votes cast on Friday’s brief meeting are still being counted and verified. But it already appears that Rusal has failed to elect more than two of its own candidates for the new board, and none of the independents it had favoured. However, the candidacy of Alexander Voloshin, the Yeltsin-era placeman, appears to have won election after Interros also threw its votes behind him.

Evidence of the new alliance between Usmanov and Deripaska is the report in Kommersant that the 4% to 5% shareholding which Metalloinvest has held in Norilsk Nickel — insufficient before to elect its candidate, Ardavan Farhad Moshiri, to the board — has been reinforced by Rusal votes to give Moshiri a seat this time round. Moshiri, 55, a London-based Iranian, is a chartered accountant by trade, and he is one of Usmanov’s long-serving business partners.

The price, according to the newspaper, is that “Mr Usmanov said that [Metalloinvest] was once again talking about the merger of Rusal, Norilsk Nickel and Metalloinvest in one large holding company which, together with non-ferrous metals will be engaged in the production of iron ore. Ít’s an inevitable process that we will sooner or later arrive – said the businessman.”

Metalloinvest is a privately owned holding company with two iron-ore mines and two Russian steelmills, with a rolling-mill in the United Arab Emirates producing finished steel from steel supplied from Metalloinvest’s Russian operations. The holding produces sporadic and selective financial disclosures. It is believed that Usmanov owns a 50% stake; Andrei Skoch, 30%; and Vasily Anisimov, 20%. Their attempts, individually and collectively, to sell their shares to Nathaniel Rothschild or another strategic international buyer; to a Japanese trading company; and to retail investors in an initial public offering (IPO) have all been failures to date. The 4-year saga can be followed here. Usmanov’s ambitious schemes to create a Eurasian iron-ore alliance, combining Mikhailovsky and Lebedinsky mines in Russia with iron-ore mines in Ukraine and Kazakhstan, have also come to a complete dead-end.

Japanese investigation of Usmanov and his partners continues, but Usmanov’s leaked attempt to sell Mitsui a 10% shareholding for up to $2 billion – first disclosed last October – has not materialized six months later. Metalloinvest won’t explain why.

Two attempts at expanding his shareholding control or completing a takeover, conducted by Usmanov under the London rules, have also failed – the first at the Anglo-Dutch steel company formerly called Corus in 2003 and 2004; and since 2007 at Arsenal Football Club, an English soccer team.

At home and until now, Usmanov has pledged to cooperate with Potanin, and not only in the fight over future control of Norilsk Nickel. The two were for a time talking partners in the Udokan copper mine project in southeastern Siberia; that is an asset Usmanov over-paid for in 2008, and cannot afford to develop with Metalloinvest’s $4 billion debt burden.

As for Usmanov’s record on management efficiency and corporate governance, the long-running US litigation by Archangel Diamond Corporation (ADC) for the alleged theft of its rights to the Grib diamond pipe documents in great detail Usmanov’s involvement. He has responded by denying the claims. However, he is on the list of witnesses ADC’s lawyers will call to give evidence, should the Colorado judge hearing the ADC case rule later this week that he has jurisdiction, and that a trial should proceed. Last week, Judge William Hood issued an order for a March 18 hearing, adding: “it remains my strong desire, to resolve the jurisdictional issues as expeditiously as reasonably possible.”

So why has Usmanov thrown in his lot with Deripaska just when Deripaska and the other Rusal shareholders are on the point of negotiating a fresh increase in price for selling their 25% stake back to Norilsk Nickel?

Metalloinvest was asked to confirm if it is in favour of a merger with Norilsk Nickel? If so, what is its valuation of Metalloinvest for such a transaction? And what has happened to Metalloinvest’s earlier plans to sell a 10% stake to Mitsui, and double that amount of shares in an IPO? Finally, the group was asked to say why, if it is serious about improving corporate governance at Norilsk Nickel, has it signed a secret agreement for that purpose with Rusal? There has been no response.

Usmanov’s signal is more telling. A bid to merge with Norilsk Nickel would resolve the problems Usmanov, Skoch and Anisimov have been having in finding a foreign shareholder willing to buy their shares, either at their asking price, or at any price. If Metalloinvest were able to list in London in a few months’ time, the newly revived idea of a merger with Norilsk Nickel would put the kybosh on the scheme. But a merger with already-listed Norilsk Nickel would give Usmanov and his partners a backdoor to listing if the front-door is barred to Metalloinvest. Since Deripaska has so far failed himself to compel Norilsk Nickel to accept merger terms, and Norilsk Nickel and the government banks and shareholders will not agree (yet) to paying Deripaska’s asking price, Usmanov’s paltry 4%-5%, plus Moshiri on the board, are unlikely to improve Deripaska’s sway, and resolve the deadlock.

Perhaps then Usmanov is making a fresh advertisement that he needs help — that if Potanin won’t save Metalloinvest from its unlisted limbo, Deripaska might; and that if Deripaska might, Potanin should. Usmanov and Deripaska don’t have a history of longstanding trust – they were once co-owners of the Oskol and Nosta steelmills, but not for long. For Potanin, there remains the calculation that Usmanov’s contribution to share value may prove as insubstantial as Metalloinvest’s shares have apparently proved to be in the IPO preliminaries to date; and his debts a serious negative drag. Why then would the Kremlin calculations for the future share value of Norilsk Nickel and Rusal be any different?

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