Roman Abramovich, the Kremlin's enforcer on a peace deal at Norilsk Nickel, will pay cash straight to the Arctic giant's two main oligarch owners for a stake in the company, depriving other investors of the windfall from an end to a billionaires' feud.
Norilsk Nickel, which mines the vast mineral deposits of Russia's far north, was one of the biggest prizes handed to insiders in the post-Soviet carve-up of Russian industry that created a clique of politically powerful tycoons.
For years, the world's largest nickel and palladium producer has suffered from a feud between its two main owners, billionaires Vladimir Potanin and Oleg Deripaska.
Fellow billionaire Mr. Abramovich, owner of London's Chelsea soccer club, settled the row last week by sweeping in to buy a stake under a deal that appeared to have the blessing of President Vladimir Putin.
A revision, announced on Tuesday by Norilsk and Mr. Deripaska's Hong Kong-listed aluminum producer UC Rusal, would see Mr. Abramovich buy a slightly smaller stake, but pay for it directly to the two billionaires' firms, rather than Norilsk.
Analysts said that means the cash windfall injected by Mr. Abramovich's Millhouse holding company would bypass Norilsk's minority investors, and probably force Norilsk to borrow to fulfill promises to increase its dividends.
"This means that Norilsk Nickel (as well as its minorities) will not receive any cash from Millhouse Capital's arrival as minority shareholder," J.P. Morgan Cazenove said.
Under the original deal, Mr. Abramovich was to buy a 7.3 per cent stake in Norilsk from the company itself for $2-billion, and also be given voting power over some of Mr. Deripaska's and Mr. Potanin's shares, representing a total of 22 per cent. The revision would see Mr. Abramovich buy a 5.86 per cent stake for $1.5-billion and be given voting control over about 20 per cent.
Alexander Abramov, Mr. Abramovich's partner in Evraz, Russia's largest steel maker, could become the new board chairman at Norilsk Nickel, a source close to one of shareholders said.
Norilsk's minority shareholders have spent the past four years caught in the quarrel between Mr. Potanin and Mr. Deripaska, who resisted pressure from his own shareholders to sell Rusal's stake in Norilsk to pay off debt, and instead campaigned for management changes and dividends from the Arctic giant.
The revision, likely to have been blessed by the Kremlin, appears to be a win for Mr. Deripaska, whose aluminum company, with $10.7-billion in debt, is struggling with weak aluminum markets and has called for production cuts to boost prices.
"The difference is Deripaska gets cash up front, which he needs for Rusal," a Moscow-based equity trader said, asking not to be identified while discussing the deal.
According to the source, Norilsk Nickel will stick to a pledge to pay dividends, another key demand by Mr. Deripaska, in the amount of $3-billion a year for 2012-14. This would roughly equal Norilsk Nickel's expected earnings, VTB Capital analyst Nikolai Sosnovsky said.
"The deal is disappointing to those minorities who expected funds from the deal to come to the company and to return via dividends," Mr. Sosnovskiy said, adding that the company would likely need to borrow to fund dividends instead.
Mr. Abramovich will hold 5.87 per cent of Norilsk Nickel, Rusal would hold 27.8 per cent and Mr. Potanin's Interros would hold 30.3 per cent, after Norilsk's treasury shares – amounting to almost 17 per cent of its issued capital – are cancelled.
To ensure Mr. Abramovich's role as enforcer of the peace, the other two billionaires will give him voting power over some of their shares, so that his voting stake amounts to about 20 per cent. That would leave the three billionaires with nearly equal voting stakes, meaning Mr. Abramovich can impose a resolution in any dispute between the other two.
Mr. Abramovich, the 68th-richest man in the world with a fortune estimated at $12.1-billion by Forbes magazine, is widely viewed as having among the strongest Kremlin ties of the oligarchs. He himself once co-owned some of Rusal's assets with Mr. Deripaska.
Mr. Potanin and Mr. Deripaska have been locked in a shareholder dispute since the Rusal bought a one-quarter stake in Norilsk just before the 2008 global crash in a deal around $14-billion.
Mr. Deripaska had accused Mr. Potanin of running the company on behalf of his own interests and refusing to pay out profits in dividends to other shareholders. Lawsuits between them were cancelled as part of last week's deal.