* Nornickel-Rusal merger would create national champion -
* Deal would also help to resist sanctions - Potanin
* Global markets depend on firms' palladium, nickel,
July 5 (Reuters) - Russian businessman Vladimir Potanin has
said he is ready to discuss a possible merger between his mining
group Nornickel and aluminium producer Rusal
, a move that could strengthen their defences against
any possible Western sanctions against them.
Potanin told RBC TV he had sent a letter on Monday
confirming his agreement to start merger discussions, citing the
desirability of creating a "national champion" and building up
"extra stability against sanctions".
The initial proposal, which would create a company with a
combined value of about $60 billion - similar to Glencore, came
from Rusal management, he added.
Rusal, the world's largest aluminium producer outside China,
did not reply to a Reuters request for comment. The Kremlin,
which closely monitors tie-ups between strategic Russian
companies, said it was unaware of merger plans.
Hong-Kong listed shares at Rusal rose by 11.35%, while
Nornickel, the world's largest producer of palladium and refined
nickel, was down 3.8% in Moscow.
Neither company has been directly targeted by Western
sanctions imposed on Russia over the war in Ukraine, though
Potanin himself was hit by British sanctions last week.
A tie-up would create a global base metals giant with
combined revenue of $30 billion. Nornickel's palladium and
nickel account for 40% and 7% of global mine production of these
metals, respectively. Rusal produced 6% of global aluminium
output in 2021.
Analysts said their combined clout could deter the West from
imposing sanctions for fear of sending prices soaring for metals
that are critical to its own industries.
The combined company would be "practically invulnerable to
sanctions, as global markets are critically dependent on their
products. Especially with the green agenda in mind," said Evgeny
Kogan, professor at the Higher School of Economics in Russia.
'TOO BIG TO SANCTION'
"The argument 'too big to sanction' sounds plausible," said
Maria Shagina, sanctions expert at the International Institute
for Strategic Studies.
"I still think that the United States and the European Union
are not ready for the repetition of the April 2018 sanctions on
Rusal was subject to U.S. sanctions between April 2018 and
early 2019 that caused a jump in global aluminium prices.
Washington removed Rusal from the sanctions list when its
founder Oleg Deripaska agreed to relinquish control of it.
Deripaska, still on the U.S. sanctions list, remains a
powerful tycoon in Russia. His relations with
Potanin are chilly.
Potanin and Rusal own 36% and 26% respectively of Nornickel,
which had a market value of $49 billion at Monday's closing
prices, according to Refinitiv Eikon data, compared with Rusal's
market capitalisation of $15 billion.
Potanin has swooped aggressively to grab new opportunities
since Russia sent troops into Ukraine and the ensuing sanctions
transformed the business environment.
His Interros group snapped up Rosbank from Societe Generale
when the French lender exited the Russian market, before buying
a 35% in TCS finance group at what its founder, Oleg Tinkov,
said was a knockdown price.
The tycoon's public statement was unusual because he
typically maintains silence until his deals are clinched.
His comments came less than a week after Britain slapped
sanctions on Potanin and six months before the
expiry of Nornickel's 10-year shareholder agreement that made
him president of the miner - signals that the move was driven by
"Instead of leaving the company, as many other big
businessmen have done recently [after Western sanctions on
them], a more elegant solution may be found - to merge with
Rusal," Kogan said on social media.
Interros Holding, which manages Potanin's assets, did not
reply to a Reuters' request for additional comment.
The shareholder agreement, which expires on Jan. 1, covers
the size of dividends at Nornickel which has been the main
reason for on-and-off rows between shareholders at Nornickel and
Rusal over the last 14 years.
The potential deal is a risk for Nornickel's future dividend
payments and would provide limited financial synergies, analysts
at BCS said in a note.
Potanin told RBC TV that the size of dividends to which
investors at Nornickel have become accustomed in recent years
will certainly not be available in 2022 nor presumably in 2023.
While Western sanctions have not directly targeted
Nornickel, they have caused problems with trade finance and
"Potanin is flagging that they are under pressure from
sanctions," said Tom Price, head of commodities strategy at
Liberum in London. "Big miners always seek low-cost funding. But
the ability of Russia's miners to do that has been severely
(Reporting by Reuters; editing by Mark Trevelyan, Gareth Jones
and David Evans)