By John Helmer, Moscow
Indirectly but without ambiguity, Alisher Usmanov acknowledged for the first time on Tuesday, in a Moscow newspaper he owns, that he has failed to sell shares in his principal asset, the Metalloinvest iron-ore mining and steelmaking group, to anyone. His recourse, he also made clear, is to hold hands with Oleg Deripaska in a combined effort to compel Norilsk Nickel and its controlling shareholders, the Kremlin and Vladimir Potanin, to buy him out, and exchange Metalloinvest shares for Norilsk Nickel shares – at a premium valuation noone has agreed to give Usmanov in his years of trying.
Metalloinvest is a private company which does not release comprehensive financial reports, nor a precise account of its shareholders. These are believed to be Usmanov (left image), with 50%, Andrei Skoch (right image)with 30%; and Vassily Anismov, with 20%. The crash of 2008 triggered loan redemptions and margin calls on debts throughout the oligarch community, but it isn’t known how much of Metalloinvest’s debt may have been secured by shares in the holding held by this troika. Covering debt was one reason, it was speculated last year in Boston and London, that the Vallar flotation by Nathaniel Rothschild was pointed initially towards the Metalloinvest assets . (In the end, Vallar decided it preferred Indonesian  to Russian assets).
Anisimov’s lack of success at selling out has been documented here .
Usmanov had tried to list Metalloinvest shares on the London Stock Exchange in 2008, when he claimed the company’s iron-ore mines and steel mills (two in Russia, one in the United Arab Emirates) were worth between $15 billion and $20 billion. That listing attempt failed; it isn’t known whether it was approved by the listing authority before it was withdrawn from the market. Usmanov went on to claim publicly that he was selling a 10% stake to the Japanese trading house, Mitsui. Nothing has come of it.
In an unusually lengthy interview with Kommersant, published verbatim on Tuesday , Usmanov said he has decided to stop playing the peacemaker between Rusal and Norilsk Nickel; between Deripaska, whom he treats as the controlling shareholder of Rusal, and Vladimir Potanin, whom he calls the control shareholder of Norilsk Nickel. “To placate Vladimir Olegovich [Potanin] or Oleg Vladimirovich [Deripaska], I do not want. Now I support Oleg, because his point of view is open, clear and specific. And Vladimir Olegovich [puts me] in mind of a chess game at the level of grand masters… Most likely, he [Potanin] did not know [his] ultimate goal. His is a kind of corporate opportunism – all movement, but the ultimate goal, perhaps nothing. That’s my opinion.”
And Usmanov’s “ultimate goal”? definitely not a merger of Metalloinvest with Deripaska’s Rusal – “we have no documents on [this] merger.” Instead, the target is for Metalloinvest to back into Norilsk Nickel, exchanging the unlisted shares for the listed ones, with super-premiums for almost everyone: “Sooner or later the question of consolidation of the mining and metallurgical complex in Russia will arise. The existing Nornikel can not remain forever a company with a $60-$80 billion [valuation]. On the basis of it, there must be created a concern in the [valuation range of] $150-$200 billion, the leader of the mining and smelting complex. In the event of consolidation with Metalloinvest, it will be the company that brings together the largest reserves of nickel, molybdenum, palladium, platinum and iron ore. And if we [develop] Udokan, the copper [mine], we will be among the first [in global copper].”
Usmanov’s conditional there is a giveaway – he appears to be admitting now that he lacks both money and expertise to develop the Udokan mine rights he fought hard to acquire in 2008 . His reference to molybdenum, which he doesn’t control but Deripaska does through the mining company he calls Strikeforce Mining and Resources (SMR), is a hint of another of their schemes. Because SMR failed to find buyers on the Hong Kong Strock Exchange last year , the new idea is to force Norilsk Nickel to buy it at an inflated price which has already been laughed out of the marketplace.
Usmanov and Deripaska were briefly partners in the control of the Nosta steelmill, which they acquired in circumstances which are called controversial when they occur in Russia. That was in 2002; Deripaska had sold out of the partnership by 2004. According to Usmanov’s interview, he and Deripaska are now partners again. The troubles Deripaska is having in the US, where government intervention has barred him from a takeover of the Opel division of General Motors, and in China, where he has been denied state approval for a share sale of Eurosibenergo, are of no concern to Usmanov’s new financing strategy because he appears to have abandoned the international markets altogether.
The Kommersant interview is being tossed over the Kremlin wall to invite a state-ordered merger on Usmanov’s terms, with Deripaska’s supporters to earn their reward. “Generally it is more of an alliance between me personally and Oleg Vladimirovich Deripaska. I think he’s a very professional manager. For a year and a half we were equal partners in one of the [steel] smelters. And I have no complaints about the way he manages his companies. All this talk about the huge debts, poor management … Yes, there can be errors in any given path of development that coincide with those or other cycles of crisis. But this is not an indication of weak governance.”
Norilsk Nickel is Usmanov’s target, he says, because of “what happens in Norilsk Nickel – an indicator of management weaknesses at least in the top management. For example, there I do not see any real miner. And I do not understand what’s wrong with the idea of Rusal putting at the head of Norilsk Nickel a professional manager – preferably with experience in mining and metallurgy, or even just in a large industrial holding company.”
Usmanov sidesteps the negative assessments in the international markets that have prevented his selling Metalloinvest shares so far. Instead, he now says he will borrow money on the debt markets if he can. “Plans to enter the capital markets there are. But to hold an IPO is pointless. Now Metalloinvest is using all possible ways of attracting low-cost capital, to refinance more expensive debt. For example, we have attracted a syndicated loan. Next, we want to work on the issue of Eurobonds… In principle, we are ready for an IPO in all aspects, starting with accountability…”
In practice, and there’s the rub, there is no other partner in prospect but Deripaska, and no merger taget except Norilsk Nickel. “We are not looking for mergers. The position of Metalloinvest is an independent one, the completely self-contained development of a company which today has successfully proven its viability. The ratio of debt to EBITDA is 1,3-1,5. We can safely work in it.”
Regarding Anisimov’s attempt to sell out, Usmanov said he believes there may be a deal with the state bank, Sberbank. But he and Skoch aren’t interested in buying out Anisimov. “I’m not interested in it because the deal entails a lot of bureaucratic red tape, and because I and a group of investors that I represent are satisfied with their participation in the Metalloinvest at a rate of 50%.” If Usmanov isn’t including Skoch in this reference, then he is admitting for the first time that he doesn’t own 50% of Metalloinvest, but shares the stake with others.
As for the Mitsui sale, Usmanov says: “Negotiations almost reached a deal. They wanted to enter by [buying] 15%. But the Japanese are a cautious people and they always wanted to be assured by more than 15%.We will not be ready. But talks with Mitsui will continue and find the format for partnership.”