Rusal announces merger to make world's biggest aluminum producer

Russia's OAO Rusal on Monday announced a three-way merger to create the world's biggest aluminum producer, dethroning U.S.-based Alcoa Inc. and underscoring the rise of Russia's commodities-based industries against a backdrop of rising prices.

Photo: Rusal announces merger to make world's biggest aluminum producer

Under the terms of the agreement, Rusal, which is controlled by Russian billionaire Oleg Deripaska, will issue new shares to acquire rival Russian aluminum maker Sual as well as the Jamaican, Irish and Italian alumina assets of Swiss-based commodities trader Glencore.

Sual and Glencore will hold 22 percent and 12 percent stakes respectively in the new company, Sual chairman Viktor Vekselberg said. He said he expects the new company to carry out an initial public offering in less than 18 months, most likely in London.

The expanded Rusal will control 12 percent of the world's primary aluminum, producing nearly 4 million per year and eclipsing the 3.55 million tons that that Alcoa reported in 2005.

Rusal director Alexander Bulygin put the value of the company at US$25 billion to US$30 billion and said it expected annual revenue of US$10 billion (Ђ7.9 billion).

Under the terms of the agreement, Bulygin will become the new company's chief executive. The company will have an 11-man board comprising six representatives of Rusal, two from Sual, one from Glencore and two independent directors; it will have 110,000 employees and will operate in 17 countries around the world.

The company said it hoped to secure regulatory approval from Russian authorities and the European Union by April.

"There are number of challenges that lie ahead. The deal it has to be approved by the various regulatory bodies and that always takes a bit of time, there are hurdles that you have to get across," said Sual president Brian Gilbertson, a one-time CEO at mining giant BNP Billington who will be board chairman at the new Rusal, reports AP.

Russian regulatory approval is expected to be a formality both Deripaska and Vekselberg have met with President Vladimir Putin recently and analysts say they have good relationships with the Kremlin.