Russian metals giant Norilsk Nickel (GMKN.MM) is once again considering a share buy-back, a move which analysts say appears to put paid to hopes of its two biggest shareholders settling their long-running feud.

"The management (of Norilsk Nickel) examined a buyback option yesterday," a Norilsk spokesman said on Friday. He declined to provide details.

UralSib bank said that the buyback plan suggested the conflict is far from over between Vladimir Potanin, who controls 25 percent of Norilsk through his company Interros, and Oleg Deripaska who also controls 25 percent through his aluminium group RUSAL (0486.HK).

Potanin and Deripaska have been arguing over Norilsk's strategy and dividend policy for years but earlier this month Norilsk offered to buy back RUSAL's stake for $12 billion.

And although RUSAL said it was not a seller it has hired Bank of America Merril Lynch to value the stake.

But then on Thursday RUSAL demanded an extraordinary meeting to change the Norilsk board after Norilsk had announced that its subsidiaries sold an 8 percent stake in the company to oil and metals trader Trafigura Beheer BV

RUSAL said it objected to the sale of the stake without board approval and was concerned that subsidiaries might buy more shares.

"To prevent this process, RUSAL is proposing the removal of the existing board of directors, in which the vast majority is represented by the management of MMC (Norilsk Nickel) and the representatives of Interros," RUSAL said.

"The rumoured buyback programme and the new EGM requested by RUSAL reduces the chances of RUSAL accepting the $12 billion offer for its 25 percent stake in Norilsk," UralSib said.

Earlier on Friday business daily Kommersant quoted a source close to Norilsk as saying the management had approved a two-stage buyback plan for $4.5 billion worth of its shares.

In the first stage Norilsk would aim to buy in up to $3 billion worth of its shares at a 10-15 percent premium to the market.

Then, in six months time, the company plans to buy a further $1.5 billion of the shares on the open market.


"The move (buyback) will imply an intensification of the acute shareholder conflict -- the shares will be kept as quasi-treasury and the management will be able to vote them," Troika Dialog brokerage commented.

"As such, if one adds up the 8 percent stake acquired from the company by Trafigura, Interros and the management will assemble close to a controlling stake in the company."

RUSAL has opposed previous buybacks and in June accused Norilsk's management of manipulating votes with some 8.5 percent of treasury stock. The management denied any wrongdoing.


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