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Market response to Norilsk stakeholder dispute overblown

Russian billionaires Oleg Deripaska and Vladimir Potanin are currently locked in a legal standoff over the controlling stake in PJSC Norilsk Nickel Co. Potanin, who holds a 30% stake in Norilsk Nickel, offered to purchase another 5% stake in the company from Roman Abramovich, prompting immediate protest from Oleg Deripaska.

Deripaska, who owns a 28% share in Norilsk, moved to block the sale with an injunction in a London court on Feb. 16, causing shares in both his company United Co. Rusal Plc and Norilsk Nickel to drop. In a Feb. 19 release, Rusal confirmed that Potanin's company Bonico Holding Co. offered Abramovich's Crispian Investments Ltd to buy 6,313,994 ordinary shares at a price of US$234 per offered share and US$23.40 per American depositary receipt.

Kirill Chuyko, head of equity research and metals and mining at BCS Global Markets, told S&P Global Market Intelligence that the market's reaction to the legal dispute was overblown.

"The market completely overreacted and this is a good buying opportunity," Chuyko said, adding this is not a war and the market misunderstood the severity of the dispute.

Norilsk Nickel shares fell as much as 12% on Feb. 16, while Rusal's shares dropped by 6.9% on the Moscow stock exchange, Bloomberg News reported.

Chuyko went on to explain that Potanin, who is currently president of Norilsk Nickel, was trying to limit Deripaska's interference in CapEx decisions.

"I wouldn't say that it is about control, but more about independence in CapEx decisions for Potanin. He wants to limit Deripaska's interference in his operations," Chuyko noted.

Norilsk Nickel's shareholders have enjoyed a truce over the last six years. Previously, a similar dispute was resolved when the Russian government was forced to intervene and Abramovich's Crispian Investments was brought in as a minority shareholder to keep the balance.

This deal expired at the end of 2017, Chuyko explained, meaning that Abramovich could offer his stake up for sale.

Russian government spokesperson Dmitry Peskov confirmed the Kremlin was aware of the shareholder conflict at Norilsk Nickel and said it does not expect the dispute to hinder the company's development.

"The Kremlin cannot play any role in shareholder relations," he said in a statement Feb. 16.

As it stands, the next court hearing is scheduled for the week commencing March 5.