Rusal merger creates world's largest aluminum producer

Rusal, the world’s third-largest aluminum producer; SUAL Group, one of the world’s top 10 aluminum producers, and Glencore International AG, the Swiss natural resources group; announced October 9 that they have signed an agreement to create the United Company Rusal by merging their respective aluminum and alumina assets. The new company will become the world’s largest aluminum and alumina producer, employing more than 110,000 people in 17 countries on five continents. The annual volume of production will be approximately 4 million tons of aluminum and 11 million tons of alumina. The company will account for approximately 12.5 percent of global aluminum and 16 percent of global alumina production, respectively.

The combined company will own bauxite mining, alumina refinery, aluminum smelting and foil production facilities. Under the terms of the share-for-share deal, EN+ as Rusal's shareholder will own 66 percent of the new company, with SUAL's shareholders owning 22 percent and Glencore 12 percent, respectively.

The parties expect to complete the deal by April 1, 2007, subject to approval by antitrust regulators in Russia and a number of other countries and the consent of other stakeholders through the exercise of their beneficial rights. To manage the process, the companies will create a coordination committee, which will be headed by SUAL representative.

By merging their assets, Rusal, SUAL Group and Glencore International AG are striving to create a true global leader in the aluminum industry. The company will have all the required resources to drive further expansion and diversification of its metals and mining businesses in key international markets. In addition, the merger will deliver significant synergies in areas including management, research and development and manufacturing.

The agreement also calls for the transformation of the new company into a public entity through an initial public offering (IPO) on the London Stock Exchange within three years from the date of the deal's closing. The shareholders do not view an IPO as a goal in itself, but rather as an instrument to further expand and strengthen Rusal’s market-leading position in the global aluminum industry.

The board of directors of the new company will consist of 12 members. Brian Gilbertson, currently SUAL’s president, will act as the non-executive chairman. Before the IPO, the board, in addition to Gilbertson, will be comprised of six members from Rusal, two from SUAL, one from Glencore and two independent directors. Alexander Bulygin, currently Rusal’s CEO, will serve as CEO of the joint company and will head the executive board, the highest governing body of the new company.

The United Company Rusal will take on all of the obligations that the merged companies and assets have to all stakeholders, as well as social obligations, cooperation with local communities, the support and development of the regions where they work. In addition, the new company will preserve the whole portfolio of investment projects that were developed by the companies independently before the merger. This includes the programs to modernize and develop existing production facilities.

Commenting on the agreement, Rusal chairman Oleg Deripaska said: “This transaction is a logical step in our strategy of establishing the world's leading aluminum company. The combination of Rusal, SUAL and Glencore's alumina assets transforms the new group into a truly global company. The combined company will have greater financial, technical, research and development, network and marketing resources. The transactions have a compelling industrial logic and deliver significant synergies for further growth. The new joint company will be highly ambitious and today's announcement is a staging post towards our future objectives.”

“This deal gives us a unique opportunity to realize the powerful potential, extensive experience and significant knowledge accumulated by Russian metallurgy. The new company is a continuation of our joint projects intended to create one of the leaders of the global mining and metallurgical sectors,” said SUAL Holding chairman Victor Vekselberg.

Ivan Glazenberg, the CEO of Glencore, noted: “We are pleased to join forces with Rusal and SUAL in this exciting new venture. We believe that this agreement provides us with a unique opportunity to become a part of an integrated and well-balanced aluminum corporation — the new leader in the international market. The transaction will deliver significant synergy benefits that will provide additional value for Glencore’s shareholders.”