Norilsk starts buyback after RUSAL deal fails

A man works with fused non-ferrous metals at the copper plant of the Norilsk Nickel company in Russia's Arctic city of Norilsk, April 16, 2010. REUTERS/Ilya Naymushin

MOSCOW (Reuters) - Norilsk Nickel GMKN.MM, the world's top nickel and palladium miner, launched a $4.5 billion share buyback on Wednesday after failing to persuade co-owner UC RUSAL 0486.HK to sell its 25 percent stake in the company.

Corbiere Holdings Limited, a unit of Russia’s Norilsk Nickel, on Wednesday offered to buy up to 11.9 million shares, or 6.2 percent of share capital, at $252 each.

The buyback opens a new front in core shareholder Vladimir Potanin’s campaign to secure strategic control over Norilsk, but was opposed at a board meeting on Tuesday by RUSAL’s controlling shareholder Oleg Deripaska.

“Successful implementation of the (buyback) program, coupled with the simultaneous implementation of its production strategy (will) deliver significant value and return capital to ... shareholders,” Norilsk said in a statement.

A source close to Norilsk’s shareholders told Reuters that the company was willing to raise its offer for RUSAL’s 25 percent stake to $14 billion from an original $12 billion, but Deripaska wanted $16 billion.

Norilsk decided not to offer that much because it was concerned this amount could harm its finances, the source said.

“RUSAL has always emphasized that its stake in (Norilsk Nickel) is a strategic investment, and that the company does not intend to sell it,” RUSAL said in a statement on Wednesday.

Based on current market valuations, RUSAL’s 25 percent stake in Norilsk is worth about $10.65 billion, according to Reuters calculations.

Shares in Norilsk were up 3.2 percent in Moscow at 7,019 rubles ($231) by 0837 GMT (3:37 a.m. ET), outperforming a broadly flat market.

Writing by Toni Vorobyova; Editing by Erica Billingham