The purchase by Sual Partners belonging to Viktor Vekselberg and Leonard Blavatnik of 12% in UC Rusal from Onexim owned by Mikhail Prokhorov has stalled. The deal may not take place.

"The deal is possible. Hopefully, we will soon make it," as in October the principal owner of the Renova Group, Viktor Vekselberg, commented upon the purchase of 12% in UC Rusal from Onexim. Then the sources of Vedomosti expected Sual Partners to complete the deal in November. But it is still not closed.

Sual Partners owns 15,8% in UC Rusal and was ready to redeem 12% of UC Rusal from Onexim for $700 million. The money should have been provided by VTB and Sberbank. The latter's Credit Committee last September endorsed Sual Partners with  $350 million funding. 

There were difficulties, as five sources close to the various shareholders of UC Rusal told Vedomosti. The period to close the deal is unclear, say the three of them. "It generally can never happen," says the source of Vedomosti, which is close to one of the parties in the negotiations. Representatives of Sual Partners and Onexim declined to comment.

There are several reasons. Since summer, when the parties started a dialogue about the deal, UC Rusal has risen in price by almost half, explain two sources of Vedomosti. The company quotes in summer were near historic lows, and now it's worth $9.26 billion. Onexim is not ready to sell securities for the summer price, say two sources close to the various shareholders of UC Rusal. In the fall, $700 million for 12% of UC Rusal shares corresponded to 17.3% premium to the market. On Friday, it meant a discount of 36%. Will Sual Partners offer more than $700 million for the package, nobody says. There was also an uncertainty with the loan approved by Sberbank, say the Vedomosti's informants and a source close to the bank. All attempts to ask the Sberbank representative to comment at the weekend failed. 

Another difficulty is related to the requirements of the Hong Kong Stock Exchange, say three interlocutors of Vedomosti. The seller and the buyer must prove that they are not related parties, and that the sale of only 12%, instead of 17.5% of Onexim package, is not an attempt to avoid the offer to other shareholders, explains one of them. The representative of the Hong Kong Stock Exchange in talks with UC Rusal declined to comment. He merely pointed out that the Hong Kong Takeover Code provides for certain terms of the offer.

The document obliges to send an offer with control of 30% or more shares of a public company by one person or a group of "acting in concert" persons, said partner Tertychny Agabalyan, Ivan Tertychni. In this case the definition of "acting in concert" is very broad: it may cover not only the affiliated person in the classic sense, but also other both formal and informal agreements between the parties, the lawyer said. However, he notes, to establish that concerted action is not so much the fact of the separation package as possible joint agreements of the parties to vote with the recieved packages, which together exceed 30%. This is what may be interesting for the stock exchange, said Tertychny.

Had Sual Partners acquired 12% UC Rusal, leaving ONEKSIM with 5%, a shareholders' agreement between the owners of the largest aluminum companies would have still been valid. It gives the minority shareholders, among others, the right of veto on key issues (contracts, transactions, and so forth.). Onexim will also retain the right to nominate one director to the Board of Directors of UC Rusal, and one director to the board of directors of Norilsk Nickel (UC Rusal has 27,67% of shares). The conditions is applicable if UC Rusal and Interros have four members in the board of directors of Norilsk Nickel; if there are six or more, Onexim can nominate two directors. Now the board of directors of Norilsk Nickel includes 13 persons; five of them are independent, eight are the representative of UC Rusal and Interros interests. If Onexim and Sual Partners agree to jointly nominate a representative of the latter in the Council of Norilsk Nickel, the stock exchange and the regulator may have the assumption that they could agree about other aspects of the management of their shares in UC Rusal, and, therefore, may be recognized as acting in concert, Tertychny explains.

Most likely, the time for the deal is lost, unless the parties agree on a discount to the market price, says analyst Kirill Chuiko at BCS. UC Rusal has greatly risen in recent months, but there is no certainty that the growth will continue.