Hong Kong regulators review Rusal demerger plan

Stock market regulators in Hong Kong are examining plans by Russian aluminum producer Rusal to split its high-carbon smelters and refineries into a separate company to be listed in Moscow.

The decision to review the proposed split was triggered by a complaint from Odey Asset Management, according to emails viewed by the Financial Times.

The London-based hedge fund believes a recent deal between Rusal’s two biggest shareholders means they shouldn’t be allowed to vote.

If they were prevented from voting on the deal, it would give minority shareholders enormous clout. Hong Kong-listed Rusal has a free float of just over 10 percent according to some analysts and the split requires the support of 75 percent of shareholders attending a special meeting.

Hong Kong Exchanges and Clearing declined to comment.

Rusal announced the split plan in May in a move that would allow it to focus on the rapidly growing “green aluminum” market.

The company is 57 percent owned by EN +, the metal hydropower group controlled by Russian oligarch Oleg Deripaska. Its second shareholder with 25.5% is Sual Partners, a vehicle in which billionaires Leonard Blavatnik and Viktor Vekselberg are investors.

For much of the year, Sual has been at loggerheads with Rusal and EN +, calling for the appointment of a new board of directors and the resumption of dividends. He opposed the split and voted against the plan to rename Rusal AL + at its annual meeting.

However, Sual dropped his opposition to the spin-off this month after “further discussions with EN +”. The “alignment”, as EN + called it, has sounded the alarm at Odey, who fears that an attempt to buy out minority shareholders once the split is completed may be attempted, according to people familiar with the matter.

Rusal is worth $ 15.6 billion, just $ 3 billion more than the value of its 25.5% stake in Russian metal miner Norilsk Nickel. At current prices, its value including net debt, adjusted for its stake in Norilsk Nickel, is about 3.5 times expected earnings before interest, taxes, depreciation and amortization, according to JPMorgan.

Odey’s Natural Resources Fund, run by Henry Steel, told Rusal and his advisers it would vote in favor of the deal, but only if Rusal sets out a sustainable return on capital policy, the people said – a move that , according to him, would contribute to a re-rating of its actions.

Aluminum prices have risen by more than 30% this year following production cuts in China, boosting profits and cash flow for Rusal, which holds 6% of the global market. However, the company again decided not to pay a dividend, focusing instead on reducing debt.

Odey does not own any shares in Rusal but does hold derivative products which give it the possibility of acquiring a stake. Steel used derivatives to demand higher bids in the Acacia Mining and Sirius Minerals buyouts. Its fund is up 20% since its launch in 2019 and 30% this year.

Rusal said he was not aware of any investigation by HKEX and had yet to release any information regarding how to vote for the split.

“The case for the split is clear and will create value for all shareholders,” the company said in a statement. “The two companies will have a different trajectory and strategy to decarbonize their operations, but they will share the same 2050 goal: net zero. “

EN + declined to comment. Sual did not respond to a request for comment.

Steel said he discussed his concerns with Rusal and the president of EN +.

“We are grateful for the continued engagement with all stakeholders, in particular with the boards of EN + and Rusal, to ensure that potential or perceived conflicts with minority shareholders are addressed,” he said. he declares.

Rusal’s spin-off project comes after the EU launched a carbon border adjustment mechanism that will force importers of steel, cement, aluminum and fertilizer to pay the same carbon costs as European industry is faced with this. The prospect of the tax alarmed Russian businesses, who said they would be hit the hardest.


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