Abramovich’s Nornickel sale shows taste for Russian stock deals

Roman Abramovich’s sale of a stake in Russia’s biggest mining company shows investor appetite for the country’s assets is returning.

Crispian Investments Ltd., a company controlled by Chelsea Football Club owner Abramovich and his partners, increased the size of the offering in MMC Norilsk Nickel PJSC to 1.7 percent from the originally envisaged 1.25 percent because of the strength of demand. The stake was valued at about $551 million, with 39 percent acquired by U.K. investors, according to VTB Capital, one of the sale organizers.

There is a significant demand for high-quality Russian assets

“This transaction is the largest share sale by a Russian company since Magnit PJSC’s accelerated bookbuilt offering in November 2017,” Dmitry Bolyasnikov, co-head of equity capital markets at VTB Capital, said in an email. “There is a significant demand for high-quality Russian assets.”

When the U.S. imposed sanctions last April on Oleg Deripaska’s companies, including United Co. Rusal, the appetite for all Russian stocks among international investors dried up. While Deripaska, an ally of Russian leader Vladimir Putin, will remain under U.S. sanctions, the Treasury lifted restrictions on the aluminum producer and two other firms linked to the billionaire at the end of January.

Record value

Abramovich’s offering came after Nornickel’s market value climbed to a record last month in Moscow, helped by the jump in the price of palladium. The miner controls 40 percent of global supply of the metal, used to cut emissions from gasoline cars. The tycoon will remain a minority investor, retaining his role as mediator between Nornickel’s biggest shareholders, Rusal and billionaire Vladimir Potanin’s Interros.

Nornickel fell as much as 4.3 percent in Moscow, the most since Sept. 28. The shares traded down 3.3 percent at 13,900 rubles as of 2:30 p.m. local time.

Last year, Abramovich and his partners offered to sell almost 4 percent of Nornickel to Rusal and Potanin for $1.5 billion. In June, Rusal won a legal battle in a London court to block the sale, saying the offer was conducted in the wrong way and the stake could freely be sold only to third parties.

Power play

Rusal and Potanin have long vied for power over Nornickel, which operates some of the richest platinum, palladium and nickel mines. President Vladimir Putin intervened in 2012, brokering an agreement under which an Abramovich-controlled company acquired a small stake in exchange for keeping the peace between the two largest shareholders.

Crispian has a two-month lockup period before it can sell another portion of its stake in Nornickel, Interfax reported on Wednesday, citing the terms of the offer. Before the current sale, Abramovich and his partners controlled about 6 percent of the miner.

“Overhang risks will persist” as Crispian still has a stake, BCS Global Markets analysts said in the note. “We see further downside risks for base metal prices and, hence, the company’s valuation.”

(By Yuliya Fedorinova)