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By John Helmer in Moscow

Yury Humber and the Bloomberg bureau in Moscow run by Bradley Cook have a special relationship with United Company Rusal.

It’s so special that a category of source has been created by Bloomberg to reflect publicly when the agency is publishing exactly what Rusal wants the rest of the world to believe, when the source cannot be named; when the claims cannot be corroborated independently; when other reporters and services don’t believe it; or when the claims aren’t true. The first time the source appeared, it was reported by Bloomberg as “someone familiar with the matter”. As the unlikelihood of the Bloomberg report, or the lack of corroboration has grown, so do the number of “people familiar with the matter.” In December, when Rusal was still struggling to win approval of its listing prospectus by the Hong Kong Stock Exchange, Bloomberg reported the approval had already been granted “according to two people, who declined to be identified”.

Next, when Bloomberg reported that Rusal had achieved a share price fixing of up to HK$12.50 for the initial public offering, the sources were “two people familiar with information.” A month later, to convince the market the Rusal stock was in genuine demand in the market, Bloomberg’s intrepid reporter Humber found the stock was already “fully subscribed”. His sources were “two familiar with the matter”. They requested anonymity, according to Humber, “because the discussions with investors are private”.

In retrospect, the track record of “people familiar with the matter” is as unsupportable as Rusal’s share price. This crashed from an untraded fixing of HK$10.80 on January 27 by 38% to HK$6.72 on June 18. London investment fund managers who did not buy Rusal shares claim there has been rapid churning of the stock – more than 60% of those who bought shares in January had sold out by March. The Bloomberg chart is more convincing than the report texts:

In May, just “one person with knowledge of the decision” remained for Bloomberg to cite after an abortive effort to find new share buyers in Hong Kong for Strikeforce Mining and Resources, a mining company owned by Oleg Deripaska, chief executive and controlling shareholder of Rusal. Bloomberg tried to be as reassuring about the bad news as the one anonymous source could be: “The company, also known as SMR, would start the IPO when stock markets have stabilized, said the person, who asked not to be identified because the information is private”, Bloomberg reported at the time.

If the number of persons from whom Bloomberg gets its Rusal tips moves in inverse proportion to the credibility of the information, the unveiling of three anonymous tipsters last Friday suggests there is something big and newsworthy which Rusal wants the market to anticipate. The Bloomberg track record suggests that what is true is likely to be the opposite of what Rusal has arranged for Humber and his bureau to report here: “Russia is considering buying a stake in OAO GMK Norilsk Nickel, the country’s biggest mining company, amid an ownership battle between two of its largest shareholders, three people familiar with the matter said. The government has approached Norilsk shareholders about buying a stake in the Moscow-based company, said the people, who declined to be identified because the talks are private. Oleg Deripaska, the biggest shareholder in United Co. Rusal, has discussed selling Rusal’s 25 percent stake to state-owned companies, one of the people said. Two of the people said talks concern other shareholders’ stakes, not Rusal’s.”

Three anonymous informants are a record for a Bloomberg report on Rusal. Two appear to be Humber’s familiar standbys; one of them appears to be disclosing something that isn’t new at all. The option for Deripaska to sell Rusal’s 25% stake has been in discussion ever since Deripaska began defaulting on the $21 billion in debts he, Rusal, and the companies in the Basic Element holding had run up before the 2008 crash.

What is news, however, is that Rusal appears to have arranged for Humber and Bloomberg to reveal something that is stunning indeed. This can be understood from the track record of the “people familiar with the matter”, and interpreted correctly by reversing the meaning of what Bloomberg says they said. In short: Deripaska has been told by the Russian government to put an end to his hostile takeover of Norilsk Nickel, and sell out his 25% stake in the company.

If that is true, it is the second sign in the space of seven days that Prime Minister Vladimir Putin and Deputy Prime Minister Igor Sechin have decided to put an end to Deripaska’s bid to save Rusal’s weakening financial position by reversing into Norilsk Nickel, and absorbing all its cash. The first sign was a statement by Norilsk Nickel’s chief executive, Vladimir Strzhalkovsky, published on July 15. No Russian with Strzhalkovsky’s rank and credentials has ever before attacked Deripaska – without the patronymic courtesy – for his managerial incompetence, his runaway debts, and his track record which is on trial in Michael Cherney’s UK High Court case, as well as in the Spanish court proceedings before Judge Fernando Andreu. According to the tried and tested practice of Kremlimonology, you only kick a man in public, when it has already been decided in private that he’s down.

The latest Bloomberg scoop corroborates this. The publication of the Rusal denial should also be read in reverse. A middle-ranking Rusal executive, Maxim Sokov, is reported as telling Bloomberg the Norilsk stake “is a strategic asset and there are no plans to sell it.” What this means is that Rusal isn’t planning to sell unless it gets its price. For publication, Sokov also repeats Rusal’s campaign slogan: “the only reason the government could decide to look at buying a stake in Norilsk Nickel is because of the potential damage to the company being caused by past and possible future backstage deals between Interros and management of Norilsk Nickel.” This means that Rusal acknowledges the possibility of a government order to buy a Norilsk Nickel stake from one of the existing Russian shareholders – and Rusal’s apprehension that it is its stake to be taken over.

It is possible, as the Bloomberg report canvasses, that Alisher Usmanov and the Metalloinvest holding may be looking to sell their 4% stake in Norilsk Nickel. They need money to clear their debts, though not quite as much and as urgently as Deripaska. But since they have consistently aligned themselves with the company management against the Rusal takeover – they voted for the anti-Rusal majority on the new Norilsk Nickel board last month – there is no sense in Rusal making this the point of a Bloomberg scoop. Sell or not, the Usmanov shareholding won’t be available for Rusal to buy or to influence.

It is safer for Rusal when the company speaks through the “people familiar with the matter”, for Sokov has said too much. The other shareholders of Norilsk Nickel aren’t selling, and Rusal isn’t allowed by its bank loan convenants the cash to buy. There is just one conclusion — the backstage deal Sokol admits Rusal is afraid of is the one that will cancel their stake. What the “three people familiar with the matter” really mean to say is that Deripaska has received new marching orders from the Kremlin, which he dare not disobey.

What reason is there then for surfacing the possibility in this reverse version? Simple – the report is encouragement to the market to believe there is a new sharebuyer in the market, and to bid up the Norilsk Nickel share price. Deripaska wants more cash for his exit – Bumber and Blowberg are doing their best to help.
The three people familiar with the matter realize they have their work cut out. Since April of 2008, when Deripaska closed his deal with Mikhail Prokhorov to buy the stake in Norilsk Nickel, the share price has lost $113, putting Rusal $5.4 billion in the hole. On top of the Rusal shares Prokhorov received in the transaction – now amounting to 19.2% of the Rusal share issue — Deripaska had to pay Prokhorov $7.24 billion in cash. If Deripaska managed to get today’s market price for his Norilsk Nickel shares, Rusal would recover $8 billion.

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