Metals Magnates In $8.5B Merger

Rival investors who have been battling for control of the aluminum industry said Monday that they will merge their holdings to create the world's second-largest aluminum firm, an $8.5 billion giant that will control about 75 percent of the nation's aluminum production.


The new holding, Russian Aluminum, will control the nation's three largest aluminum smelters - Bratsk, Krasnoyarsk and Sayansk - as well as top Russian alumina producer Achinksk and Nykolayev Alumina, Ukraine's biggest alumina plant.


Alumina is the main component used to produce aluminum.


The holding company looks set to generate earnings of some $2.4 billion a year, perhaps more if its aggressive expansion plans bear fruit.


At an expected capitalization of some $8.5 billion - according to estimates by Vedomosti business daily - Russian Aluminum will be second only to ALCOA of the United States, which is worth some $25 billion.


Russian Aluminum was set up by shareholders in Siberian Aluminum and oil giant Sibneft and registered with the Federal Securities Commission last week, Vershinin said. Siberian Aluminum chief Oleg Deripaska has been named acting head of the new holding.


Shares in the open joint-stock company will be divided among the shareholders in parity to their stakes in the aluminum companies, Russian Aluminum said in a statement.


"Russian Aluminum was founded with the intention of consolidating the [shareholders'] aluminum assets in a single, vertically integrated company," , said Russian Aluminum spokesman Vladislav Vershinin.


"We still need to talk with the regulatory authorities and the Anti-Monopoly Ministry to get permission for the holding," he said. "We think that the process will take some time, at least several months."


In the meantime, Russian Aluminum will oversee the purchase of raw materials, production and sales for Bratsk, Krasnoyarsk and Sayansk, he said.


The Anti-Monopoly Ministry declined to comment Monday.


However, Anti-Monopoly Minister Ilya Yuzhanov spoke in support of aluminum consolidation at a parliamentary hearing Friday, saying aluminum producers needed to increase their influence on the world market.


Monday's announcement puts an end to weeks of speculation in the aluminum industry over how Siberian Aluminum, once Russia's biggest aluminum group with control of the Sayansk and Nikolayevsk plants, would get along with the shareholders of Sibneft.


Those shareholders, who have not been identified but are believed to include tycoons-turned-Duma deputies Roman Abramovich and Boris Berezovsky, caught the industry by surprise in early February when they snapped up controlling stakes in the Krasnoyarsk Aluminum Plant, Bratsk Aluminum Plant and Achinksk Alumina.


At the same time, the Berezovsky-founded LogoVAZ car dealership acquired a controlling interest in Russia's fifth-largest aluminum producer, Novokuzbetsk.


Vershinin could not say Monday if Novokuzbetsk would be part of the holding.


"For now, that is unknown," he said.


Some observers hailed the planned merger as a step forward for the metals sector. "This is a good sign for the Russian aluminum industry," said one metals analyst at a major Western brokerage.


"Consolidation will slash production costs and make the plants more competitive."


Meanwhile, the remaining aluminum plants are apparently embracing the advantages of consolidating and are scrambling to strengthen what influence they have left. Siberian-Urals Aluminum Co., which controls No. 4 producer Irkutsk/Urals, is in negotiations with Trastkonsalt, which runs the No. 6 Bogoslovsky, No. 7 Volgograd and No. 8 Kandalaksha plants.


An allied Siberian-Urals Aluminum and Trastkonsult would control 10 percent to 15 percent of the market, according to Aton.


The North Western Aluminum holding, which controls the smaller Nadvoitsy and Volkhov plants, has about a 5 percent share of the market.


Tragedy struck Trastkonsult last week, with the murders of the daughter of the company's chief executive and her husband.


The bodies of Alexander Nalimov and his wife Galina - daughter of Trastkonsult boss Vasily Anisimov - were found by police in their Yekaterinburg home, bound and killed execution-style, the newspaper Kommersant reported Saturday.