March 27, 2007 / 8:42 PM / 13 years ago

UPDATE 4-Russia forms world's largest aluminium producer

(Adds Alcoa production and revenue data in 7th paragraph)

By Aleksandras Budrys

MOSCOW, March 27 (Reuters) - Russia’s aluminium billionaires, who have created the world’s largest producer of the metal, said on Tuesday they would float the firm within three years as the country enhances its presence on global resources markets.

United Company RUSAL will produce one-eighth of the world’s aluminium, surpassing Alcoa Inc. (AA.N) and Alcan Inc. AL.TO, by combining RUSAL, smaller Russian rival SUAL and assets of Swiss-based commodities trader Glencore. Annual sales will be around $12 billion.

“The deal is a proactive response to several significant industry trends: dynamic growth, competition to secure access to energy and raw material resources and active consolidation,” said Alexander Bulygin, chief executive of the new company.

Bulygin told Reuters the company would invest between $2.5 billion and $3 billion annually starting this year on various projects.

RUSAL, owned by billionaire Oleg Deripaska, will own 66 percent of the new group, which will have capacity to produce about 4 million tonnes of aluminium and 11 million tonnes of alumina, the raw material for the metal. SUAL will own 22 percent and Glencore 12 percent.

Alcoa, previously the world’s biggest primary aluminium producer, last year produced 3.55 million tonnes of the metal used in cars, drinks cans and cooking foil. Canada’s Alcan produced 3.4 million tonnes.

Pittsburgh-based Alcoa considers itself the biggest overall aluminium company since it produced more alumina — 15.6 million tonnes last year — and had $30.4 billion in revenues, which is 2-1/2 times more than RUSAL.

WHERE TO LIST

The companies did not say where they intended to list United Company RUSAL. Viktor Vekselberg, SUAL’s co-owner and nonexecutive chairman of the merged company, has said a listing could occur in London within 18 months.

Vekselberg and Deripaska will both serve on the 12-member board of United Company RUSAL, along with Bulygin, SUAL shareholder Len Blavatnik, Glencore CEO Ivan Glasenberg and two independent nonexecutives. The 12th member will be appointed by July 1.

Blavatnik, whose Access Industries company owns 30.13 percent of SUAL, said in a separate statement the merger would ensure “the ability to compete successfully for global capital, customers and assets.”

SUAL President Brian Gilbertson, once tipped to be chairman of the new company, was not named among the board members in the statement. Russian media have reported he would leave the company after the merger.

“There is nothing out of the ordinary in Gilbertson leaving, as he was appointed to head an independent SUAL, which had planned its own IPO,” said Vladimir Zhukov, senior metals and mining analyst at Alfa Bank.

“And there is also nothing extraordinary in the company’s board chaired by one of the company’s owners, who is a very well-known figure.”

United Company RUSAL combines four bauxite mines, 10 alumina refineries, 14 aluminium smelters and three foil mills. The company’s assets and over 100,000 employees are located in 17 countries.

The company also owns bauxite reserves and has access to a significant energy base, the statement said.

Bulygin said the new company’s focus will remain on aluminium and energy, although he did not rule out diversification into other metals.

To see an INTERVIEW with United Company RUSAL CEO Alexander Bulygin, please double-click on [ID:nL2723875].

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