Russia » Economics
Author`s name Michael Simpson

Russian Oligarch Bought American Monopolist

Will Russian top-managers run Stillwater Mining?
When this deal was announced last year, the possibility of Russian top-managers being at head of the American company seemed to be fantastic. Over the years of reforms people in Russia have got used to the fact that American companies often buy Russian enterprises. It is for the first time that a Russian company buys an American monopolist. It was not globalist Mikhail Khodorkovsky or Boris Berezovsky, a politician living in an exile in London, who bought the American monopolist, Stillwater Mining. Vladimir Potanin, the most non-scandalous Russian oligarch struck the deal.

It would be quite natural if the American business community and the authorities took every effort to prevent the deal. However, the US Federal Trade Commission allowed Russia's Norilsk Nickel buy Stillwater Mining, the only American producer of palladium and platinum. As is known, the deal had been previously approved by shareholders of the American company. Thus, all necessary requirements were observed to register the deal, the first purchase of this kind in the modern Russian-American business relations.

Stillwater Mining shareholders approved of the deal with the Russian enterprise Norilsk Nickel at an extraordinary meeting on Monday. According to the deal, the Russian company purchases 51% of the American only producer of palladium and platinum. The management of the American company informs, 82.9% of the shareholders participating in the meeting voted for the deal. Stillwater Mining Chief Executive Frank McAllister said at the meeting that after approval of the Federal Trade Commission there were no obstacles for striking the deal and it would be completed until the end of the month.

Norilsk Nickel agreed to pay $100 million and 877 ounces of palladium for 51% of Stillwater Mining shares. So, local stockbrokers say the sum total of the bargain will make up about $260 million. According to a scheme suggested in the framework of the deal, Stillwater Mining is to issue 45.5 million of new shares to hand them over to Norilsk Nickel.
Officials in Norilsk Nickel admit that the bargain is extremely profitable for the Russian company. In fact, Norilsk Nickel is experiencing no problems with palladium at all. What is more, Stillwater Mining has concluded futures contracts for palladium supplies to American companies (the supplies will be done at a fixed price) within several next years. These contracts are also very convenient for the new Russian owners as they will help the Russian company to sell its own palladium stocks. It is supposed that this very fact allowed making part of payment for Stillwater Mining shares in palladium.

As for Americans, they also hope to derive considerable profits from the deal. The deal with Norilsk Nickel will help the US company settle part of the corporate debts and acquire extra finance for further development of the business.

It is quite natural that new owners would like to introduce new rules at the US enterprise. Vladimir Potanin, the head of the Interros holding (the holding is the owner of Norilsk Nickel) visited the USA and told journalists that the Russian side suggested bringing of five members to the Stillwater Mining Board of Directors. No comments on the problem have been yet obtained from the American side. However, as far as Americans have consented to selling of Stillwater Mining shares to the Russian company, it won't be a problem at all to let Russian top-managers run the company.

The history and traditions of American corporate culture are older and stronger than the Russian ones. But Russians are known for their quickness in grasping important knowledge. What is more, against the background of the recent corporate scandals in the USA, Americans shouldn't wave aside fresh blood and other business views.

On June 17, the Central Bank of Russia allowed Norilsk Nickel to withdraw its capital abroad to buy 51% of Stillwater Mining Company shares. This fact allows treating the deal as concluded. Deputy Director General of Norilsk Nickel Dmitry Razumov says that a license has been issued for Britain's Norimet Ltd., a 100% branch establishment of Norilsk Nickel. It will be this company that is to pay for Stillwater Mining shares. According to Dmitry Razumov, as soon as the deal is concluded, the independent candidates suggested by Norilsk Nickel will automatically become members of the Stillwater board of directors.

Recently, outstanding Russian economists and politicians commented upon the purchase of Norilsk Nickel.

Leonid Roketsky, Federation Council member

The deal is a sure recognition of the strength of Russian business and high business reputation of Russian companies. Russia President Vladimir Putin said in his State of the Nation address that Russian business should enter the international market. This will certainly improve the economic cooperation between the USA and Russia; it will also help the Russian business community to integrate into the world economy.

Alexander Livshits, Russia's Ex-Minister of Finance

The purchase of Stillwater Mining shares will allow Norilsk Nickel to strengthen its positions on the market, although they are already rather stable now.

Yaroslav Shvyryayev, Duma deputy

This is the first precedent of such a large scale: Russia purchased shares of a super monopolist in palladium production situated in the USA. Norilsk Nickel is a company registered in Russia, which means that the company transfers taxes to the budget. The purchase is a correct doing from both, psychological and political points of view. It is very advantageous to run this market. Bargains of this kind were struck already in the Soviet era; they were concluded according to a closed scheme through the third countries. This time the bargain is legal.

Sergey Shtorgin, Deputy Chairman of Duma's budgetary and revenue committee

Russian enterprises have spare funds that help expand the business at home as well as abroad. This proves that Russian economy is developing. The deal concluded by Norilsk Nickel means that the Russian company got spare funds and invested it in purchase of a foreign company. Now it turns out that not only foreign companies can purchase Russian enterprises, but Russian companies also can buy foreign business.

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