En+ Considers Carve-Out of Rusal’s International Assets

(Bloomberg) -- The parent company of Russian aluminum giant United Co. Rusal International PJSC is considering carving out its international business into a new company owned by management and non-Russian investors.

The discussions show how the invasion of Ukraine has brought down the curtain on any hopes of corporate integration between Russia and the world. The deal, if it goes ahead, would go a long way to unpicking the 2007 merger that created the present-day Rusal with the ambition of building a Russian resources giant that could challenge the likes of Rio Tinto Group and BHP Group on the world stage.

Rusal is 57% owned by En+ Group International PJSC. The new company would take over Rusal’s alumina, bauxite and aluminum assets across the globe, including in Africa, Australia and Europe, according to people familiar with the matter, who asked not to be identified discussing private information.

The deal would leave two companies: a new entity that would hold the group’s international assets and would no longer have any Russian ownership, control or management, and the existing group’s largely Russian assets, according to one of the people.

En+ Chairman Gregory Barker will step down from the En+ board to focus on the deal and potentially lead the new company, the people said.

Glencore Plc, the miner and commodity trader, is among En+’s largest non-Russian shareholders, and therefore is likely to be involved in the deal, one of the people said.

A Glencore spokesman declined to comment.

Since Russia invaded Ukraine last week, international investors have sought to dump Russian assets, while European banks and companies have become increasingly unwilling to deal with Russian companies. That situation means Rusal’s mixture of Russian and international assets as well as investors looks increasingly untenable.

Among Rusal’s international assets are an alumina plant at Aughinish in Ireland which is a key supplier to the European aluminum industry, as well as an alumina plant in Jamaica, a stake in a Rio Tinto Group plant in Australia, and bauxite mines in Guinea.

The group also owns an alumina refinery in Ukraine, which announced a halt to shipments this week. It’s possible that the Ukrainian plant would be included in the international assets to be carved out but not yet clear, two of the people said.

Many of the assets that would be carved out under the deal were originally owned by Glencore before the 2007 merger of assets that created the modern-day Rusal. That deal came at a moment of heightened optimism about Russia opening up to international markets. Russian aluminum groups Rusal and Sual were combined with assets owned by Glencore to create what was at the time the world’s largest aluminum group.

It’s not clear how the move will affect an earlier plan to split off Rusal’s more carbon-intensive assets. It also may require the approval of the second-largest Rusal shareholder, Sual Partners. A Sual representative wasn’t able to comment immediately.

Sanctions on Russian tycoon Oleg Deripaska, the leading shareholder of the group, threw the global aluminum market into crisis in 2018, before a deal was struck with the U.S. Treasury that reduced Deripaska’s involvement and removed the sanctions on the company.

The press service at En+ declined to comment.

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