* Norilsk peace deal clips oligarch's wings
* CEO role compensates for loss of de facto control
* Potanin masterminded 1990s privatisations
* Clash with Deripaska hobbled mega-merger hopes
By Douglas Busvine and Megan Davies
MOSCOW, Dec 17 Vladimir Potanin long exuded
confidence that he would prevail over rival oligarch Oleg
Deripaska in their four-year battle for control over $30 billion
Russian miner Norilsk Nickel.
Yet, after appearing for most of that time to have the upper
hand, it is Potanin who has finally had to cede control over the
world's top nickel and palladium producer, which he effectively
privatised to himself back in the 1990s.
Potanin's appointment on Monday as Norilsk CEO is a
face-saving compromise that cannot hide the Kremlin's insistence
on bringing in Chelsea soccer club owner Roman Abramovich as
peace enforcer, say industry insiders and analysts.
"It's important to understand Potanin's motivation: His
position is very important to him," said one well-connected
industry source in Moscow.
"If he's a manager, even without control, he can strengthen
his social status within his reference group."
Potanin, 51, will keep the largest economic interest in
Norilsk, with a 30.3 percent stake compared to the 27.8 percent
owned by Deripaska's aluminium firm RUSAL.
Abramovich will buy a stake of nearly 6 percent for $1.5
billion, but wield a voting stake of 20 percent, ending
Potanin's control over the board and Norilsk's huge cash flows.
As recently as September, Potanin took the liberty of
mocking Deripaska, saying: "Oleg Vladimirovich doesn't really
know how to lose, to concede or to compromise."
A smile softening the hard-man image created by his
all-black outfit and stocky build, Potanin told Reuters that
Deripaska "apparently didn't do much sport when he was a child.
I did, and I don't need to compete with anyone."
In his career as a Soviet trade official, banker, deputy
premier and industrialist, Potanin has proven his ability to be
on the right side of a deal, amassing a fortune estimated by
Forbes magazine last March at $14.5 billion.
He has, however, shown little appetite for day-to-day
management, saying in 2000: "I always thought that it was easier
for me to organise something than to execute some possibly
interesting but very particular job."
For investors who have seen the value of Norilsk halve, from
peak to trough, since April 2011, the prospect of shareholder
harmony - and of bumper dividend payouts - outweighs concern
over Potanin taking on the "particular job" of CEO.
"Norilsk Nickel isn't a company that requires any long-term
strategic decisions. The operational performance is good - it's
very profitable," said one analyst who requested anonymity.
"It's not an Apple with Steve Jobs. It's Norilsk Nickel,
which is mining and just selling the metal."
Norilsk shares rallied after word of a compromise leaked out
last month. News last Friday that outgoing CEO Vladimir
Strzhalkovsky would get a $100 million payoff caused jaws to
drop but traders kept their fingers off the 'sell' button.
Potanin made his first fortune as a banker after the
collapse of the Soviet Union, emerging as the spokesman of a
group of thrusting young capitalists as ailing President Boris
Yeltsin was challenged by a resurgent Communist party.
It was he who lobbied what came to be called the
loans-for-shares scheme, lending money to Yeltsin's
cash-strapped government and auctioning off the Soviet Union's
industrial legacy when the debts went unpaid.
Potanin's Uneximbank won the right to manage 38 percent of
Norilsk in Nov. 1995 with a bid of $170.1 million - just
$100,000 over the reserve price. A bid twice higher by Rossiysky
Kredit, the bank of Bidzina Ivanishvili, recently named premier
of his native Georgia, was disqualified on a technicality.
Yeltsin defeated communist challenger Gennady Zyuganov in
1996 and Potanin went into government as first deputy prime
minister, cementing the privatisations that created a new breed
of Russian oligarch.
His investment company Interros eventually paid $270
million, plus other fees, in Aug. 1997 to formally acquire the
38 percent stake in - and majority control over - Norilsk. The
price paid represents a fraction of today's valuation.
Potanin has acknowledged criticism of the sell-offs, but
argued that had the entrenched 'red directors' not been ousted
from Russia's biggest industrial enterprises, the country's
economic development would have been stunted.
Putin's ascent to the presidency in 2000 changed the rules
of the game for the oligarchs and the brashest of them -
Vladimir Gusinsky and Boris Berezovsky soon fled the country and
forfeited their assets.
Mikhail Khodorkovsky was arrested in 2003 and later jailed
for fraud and tax evasion, while his oil company Yukos was
bankrupted and nationalised, in what was widely seen as
retribution for daring to pose a political challenge to Putin.
Potanin, whose partner Mikhail Prokhorov became Norilsk CEO
in 2001, kept a lower profile as the pair built a diversified
portfolio of assets spanning energy and real estate.
Their partnership had already hit the rocks when Prokhorov,
Russia's most eligible bachelor, was arrested by French police
on suspicion of flying in prostitutes for a party at New Year's
in 2007 in the ski resort of Courchevel.
Potanin slammed his partner's "scandalous" behaviour, and
the two split their assets. Prokhorov sold his one-quarter stake
in Norilsk to RUSAL for $14 billion in cash and stock in April
2008, leaving Potanin with a stake of similar size.
The deal was seen at the time as enjoying the tacit support
of the Kremlin, but hopes of merging Norilsk and RUSAL into a
mining super-major to challenge global rivals like BHP-Billiton
were dashed by the global crash.
Potanin and Deripaska fell out over strategy at Norilsk,
with the former establishing board control and launching a
series of share buybacks.
Deripaska, who turned down a series of offers to buy back
RUSAL's stake in Norilsk, lost several court cases over the
share repurchases, while management voting treasury stock for
But, analysts say, it was the prospect of a messy round of
arbitration under British law into whether the buybacks had
violated their shareholders' agreement that finally led Potanin
"Now there is a balance and no threat, and hopefully Norilsk
will reshape into something closer to a proper mining company,"
said a second analyst, who also spoke on condition of anonymity.