Rusal bends shareholders

Things got to the point that Sual Partners (owns 25% of RUSAL) Viktor Vekselberg, who had been loyal to Oleg Deripaska for many years, decided to take the scandal into the public field. The essence of the conflict is the suspicion of the current RUSAL management of the inefficiency of deals with the American Braidy Industries, which cost RUSAL tens of millions of dollars. The company demands to study documents that can confirm or refute the arguments, but the management of RUSAL refuses to provide them. The Association of Professional Investors (API) considered the decision of the aluminum company unacceptable and recommended that Sual Partners comply with the requirements.

RUSAL shareholders at a meeting on March 27 will discuss providing full access to the company’s transactions with Braidy Industries and RusHydro. Sual Partners believes that the company has lost tens of millions of dollars due to the deals. “Based on the results of studying the materials … Sual Partners reserves the right to take further actions aimed at protecting the interests of RUSAL and all its shareholders,” Sual noted.

Prior to this, the board of directors of RUSAL recommended that shareholders not support the requirements of Sual Partners. According to the company, this is contrary to the principle of ensuring equal rights of shareholders to information. The IPA considers RUSAL’s approach “unacceptable, contrary to the principles and recommendations of the Corporate Governance Code.”

“There is obviously some conflict between the minority and the majority shareholder on the issue of providing certain information <…>,” Interfax quotes the IPA recommendation. The Association sees three ways to resolve the conflict:

RUSAL on its website discloses the documents required by Sual and provides equal access to them for all shareholders;

RUSAL provides data only to Sual;

RUSAL publicly refuses to provide data, listing the reasons for the impossibility of demonstrating this information.

At the same time, the IPA itself believes that the data should be disclosed to all shareholders. The association supported Sual in the issue of changing the charter, which, according to the company, will protect the interests of shareholders.

Now the charter states that the norms of the law “On JSC” on major transactions, on interested party transactions, on the acquisition of large (more than 30%) blocks of shares, as well as the regulation of the provision of information to shareholders, do not apply to RUSAL.

In addition, Sual notes that RUSAL does not have a “clear picture of corporate decision-making”, and the board of directors, led by its chairman, has allegedly taken and continues to take a “non-constructive and passive position” on important corporate issues.

“Chairman of the Board of Directors Bernard Zonneveld steadily takes the side of the company’s management and the main shareholder, while not showing any interest in dialogue and protecting the interests of minority shareholders,” says a Sual representative.

RUSAL established a joint venture (JV) with Braidy Industries in 2019 to build an aluminum smelter in Kentucky. RUSAL’s investments were to be $200 million in exchange for 40% of the new plant. “The deplorable results of the investment in Braidy: financial losses in the amount of tens of millions of dollars,” said Sual CEO Oleg Fomichev in a letter to the head of En + Vladimir Kiryukhin on February 28 this year.

At the same time, there has been no news about the successful launch of the rolling mill until today. Whether RUSAL made any investments in the joint venture is not known for certain, industrial expert Leonid Khazanov notes.

In 2021, RUSAL bought a 4.35% stake in RusHydro from VSMPO-Avisma, and then increased its stake to 9%, spending $454 million on it. The representative of Sual noted that the investment in RusHydro is non-core for RUSAL. It is difficult to assess how successful or unsuccessful the investments in RusHydro were, since the company’s securities have not shown strong growth in recent years, constantly trading below the level of 1 ruble per share, Khazanov explains. According to him, RusHydro’s dividends per share were not particularly impressive.

In September 2022, RusHydro announced the possibility of reducing dividend payments (according to the dividend policy, they should be 50% of IFRS adjusted net income, but not lower than the average for the last three years). For 2021, RusHydro paid 23 billion rubles in dividends.

Vekselberg’s contribution

Vekselberg had claims against the management of RUSAL back in 2012, when he loudly announced his resignation from the post of chairman of the board of directors of the company. Vekselberg stated that at that time RUSAL was “in a deep crisis caused by the actions of management.” The businessman claimed that because of them, RUSAL turned from the world leader in the aluminum industry into a company overloaded with debts, involved in a large number of legal battles and social conflicts.

Vekselberg also left the chair because he “disagrees with a number of decisions made by management.” According to him, such decisions were not coordinated with the board and in violation of the shareholders’ agreements on the strategic development of the company, the modernization of production, the implementation of social and personnel policies.

Vekselberg has served since the creation of the merged company RUSAL in 2007. Then the Swiss Glencore and Sual joined the company, which controlled 20% of aluminum capacities in Russia. In 2007, RUSAL buys over 25% of Norilsk Nickel from Oneksim.

Mutual picks between Sual and RUSAL are part of a fairly long-standing and complex relationship between the companies, says Kirill Chuiko, head of the stock market analysis department at BCS. “It is difficult to conduct analytics from the outside without details, when a lot is a trade secret. However, we can say that it is unlikely that something will change in their relationship in the near future, ”he added.