UPDATE 2-Prokhorov says Norilsk-RUSAL merger inevitable

(Adds Norilsk CEO comment, background in paragraphs 5-7)

By Anastasia Teterevleva

ST PETERSBURG, Russia, June 7 (Reuters) - A merger between Russian metals giants Norilsk Nickel (GMKN.MM) and United Company RUSAL is "inevitable" to maximise the competitiveness of both companies, billionaire Mikhail Prokhorov said on Saturday.

Prokhorov, who sold his stake in Norilsk to UC RUSAL this year, told reporters at the St Petersburg Economic Forum he also saw no obstacles to a three-way merger including Metalloinvest, the iron and steel firm founded by billionaire Alisher Usmanov.

"The global tendency is toward strengthening even such companies such as Norilsk Nickel and RUSAL," said Prokhorov, who is ranked Russia's fifth-richest man by Forbes magazine.

"A merger to increase competitiveness is inevitable." Norilsk is the world's largest producer of nickel and mines over half its palladium, a metal used in jewellery and vehicle exhausts. UC RUSAL is the world's largest primary aluminium producer.

Norilsk Chief Executive Denis Morozov said the company's best interests would be served by its various shareholders and suitors reaching a balance.

"They have their different interests, but it's important to find a balance of these interests. The question is whether this will be found. Anything is possible," Morozov said at the forum.

Prokhorov in April completed the sale of his 25 percent plus two shares stake in Norilsk to UC RUSAL. The aluminium firm controlled by another billionaire, Oleg Deripaska, has expressed its desire to effect a full-blown merger of the two firms.

In part payment, Prokhorov received a 14 percent stake in UC RUSAL. He said he wanted to raise the value of this stake, but had no plans to increase it in percentage terms.

"If I'd wanted more than 14 percent, I'd have agreed it," he said.

Prokhorov said Usmanov's Metalloinvest, which owns Russia's two largest iron ore mines, could also join the merger. Usmanov has agreed a tie-up with Vladimir Potanin, who also controls a large minority stake in Norilsk.

"Earlier, a merger between ferrous and non-ferrous metals producers was not considered to a very good thing. But after Inco was acquired by CVRD (VALE5.SA), investors looked at this as a new hit," he said. (Reporting by Anastasia Teterevleva, writing by Robin Paxton)