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Aluminum giant RUSAL's chairman quits, cites "deep crisis"

By Megan Davies and Polina Devitt

MOSCOW (Reuters) - Russian billionaire Viktor Vekselberg quit on Tuesday as chairman of the world's largest aluminum producer, UC RUSAL <0486.HK>, saying the heavily indebted company was in deep crisis after a long battle with rival oligarch Oleg Deripaska.

Vekselberg's exit widens a rift with controlling shareholder Deripaska, who had sought to build a Russian metals and mining business on a global scale by merging RUSAL with Norilsk Nickel , the world's top nickel and palladium miner.

He could now mount a legal challenge to Deripaska's strategy to hold on to a stake in Norilsk, which, if sold, would solve the company's debt crisis and enable it to look for other merger opportunities.

"I regret to say at this time that Rusal is in a deep crisis, caused by the actions of the management," said Vekselberg, listed by Forbes magazine as Russia's eighth-richest man with a fortune of $12.4 billion.

Deripaska, a theoretical physicist who emerged triumphant from Russia's aluminum wars of the 1990s, bought a one-quarter stake in Norilsk through RUSAL four years ago but the debt-financed deal quickly turned sour when the global crisis hit.

RUSAL was forced into a debt restructuring, killing Deripaska's dream of a mega-merger. But he has blocked calls by his partners - Vekselberg and billionaire politician Mikhail Prokhorov - to sell the stake back to Norilsk.

The shareholder conflict is complicated by the outsized egos of Russia's resource oligarchs, with the principal players - including Norilsk's main shareholder Vladimir Potanin - having a long history of often troubled relations.

Russia's strategic mining sector is highly politicized, and Vekselberg's resignation follows Prime Minister Vladimir Putin's victory in a presidential election, in which Prokhorov, running in his first election on a liberal ticket, took third place.

Prokhorov's investment company, Onexim, declined comment, as did Norilsk Nickel. Vekselberg was not immediately available for further comment.

THREE TIMES NO

Deripaska, having failed to secure a strategic say in Norilsk in a battle for board control, has spurned three offers by Potanin to buy back its stake at a steep premium to its current value.

And, while Vekselberg's resignation tightens Deripaska's grip as CEO of RUSAL, the company faces a struggle to pay off its $11 billion debt load.

Aluminum prices fell sharply last year as China's economy slowed, although they have recovered this year when global rivals such as Alcoa cut production.

RUSAL's stock, at HK$6.12, is now 43 percent below the level at which the company floated in Hong Kong in early 2010. Its shares were suspended after falling 1.3 percent on Tuesday.

RUSAL accused Vekselberg of failing to fulfill the role of chairman and indicated he would have been removed in any case.

"Vekselberg had failed to perform his functions as a public company board chairman over the past 12 months," it said, adding that he had not attended a board meeting since February 2011.

"In this respect, the decision of Mr Vekselberg to resign as chairman of the board preempted the anticipated consideration of this matter by the Board."

RUSAL said the board would meet on Friday to appoint an independent director to replace Vekselberg, who had posted his announcement dated March 12 on the website of Renova Group, his investment holding group and a strategic investor in RUSAL.

RUSAL STAKES

The move increases speculation that Vekselberg may sell his 15.8 percent stake in RUSAL, which he owns with partners.

Prokhorov has dismissed suggestions that he would sell his 17 percent stake in RUSAL, which he acquired in a cash-and-stock deal when he sold his one-quarter holding in Norilsk to RUSAL.

He told Reuters in a recent interview that RUSAL and Norilsk should either agree to merge or make a clean break.

"As a former chief executive at Norilsk Nickel, I have a personal opinion that it is better to sit at a table and to make an agreement - who is leaving - or to make a merger of Norilsk Nickel and RUSAL," Prokhorov said.

Deripaska, through his investment vehicle EN+, owns 47.4 percent of RUSAL but has overall strategic control.

(Additional reporting by Anne Marie Roantree and Alison Leung in Hong Kong, Thomas Grove in Moscow, additional writing by Douglas Busvine; editing by Timothy Heritage and Elizabeth Piper)

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