Deripaska Share Recipients Include His Own Charity, Source Says

(Bloomberg) -- A deal with the U.S. Treasury Department to remove sanctions on Oleg Deripaska’s companies will leave the oligarch as the largest shareholder in EN+ Group Plc even after he’s forced to transfer stakes to a Russian-controlled bank and to his own charitable foundation.

VTB Bank PJSC, a state-controlled lender, will end up with a stake of about 24 percent in EN+ under the agreement announced by the U.S. Wednesday, according to a person familiar with the details of the deal. Glencore Plc, Deripaska’s long-time ally in United Co. Rusal, will also have a significant shareholding after following through on a long-planned deal to swap its Rusal stake for shares in En+. After the Glencore deal, due to be executed as part of a series of transactions agreed with the U.S. Treasury, En+ will own more than 50 percent of Rusal’s shares.

Deripaska Share Recipients Include His Own Charity, Source Says

Another small portion of Deripaska’s stake will go to Volnoe Delo, a charity he founded, which will be able to benefit financially from the stake, said the person, who asked not to be identified because the exact terms of the agreement aren’t public. The shares will be voted by a third party -- a Russian citizen -- and Deripaska is leaving the foundation’s board.

News of the agreement to remove sanctions on the companies in 30 days -- while Deripaska himself will still be subject to them -- moved aluminum prices lower in London. The U.S. government’s decision in April to sanction Deripaska and his companies for "worldwide malign activity" roiled markets and left buyers scrambling to arrange other supplies. Deripaska’s fortune has dropped this year by $5.9 billion, or 68 percent, according to data compiled by Bloomberg.

The U.S. Treasury didn’t immediately respond to a request for comment on details of the agreement. The department said Wednesday that Deripaska would cut his stake in EN+ from 70 percent to 44.95 percent by transferring an undisclosed portion of it to VTB and a portion of it to an unnamed charity. His share would also be diluted by Glencore’s swap of its Rusal stake for En+ shares, the Treasury said in a letter.

In addition, Deripaska would only be able to vote a maximum of 35 percent of En+’s shares, according to the letter. The remainder of Deripaska’s stake would automatically vote with the majority in any vote, according to the person. The agreement to lift sanctions will take effect in 30 days unless Congress blocks the action, Treasury said.

According to the person familiar, other terms of the agreement include:

  • VTB won’t be able to vote the shares it acquires from Deripaska -- that will be done by an independent third party who is a U.S. citizen. The Russian bank will continue to be able to vote the shares that it already holds in En+.
  • Deripaska’s ex-wife and ex-father-in-law’s shares will also be voted by an independent third party, but they plan to sell them in due course. Per the latest filing, the two together hold 7.5 percent of EN+.
  • A Glencore swap of Rusal shares for EN+ shares will happen on the same terms as it had originally been agreed -- that implies that Glencore will get a stake of about 11 percent in EN+, according to a Vedomosti report last year. A Glencore spokesman declined to comment.
  • All these deals will happen in 30 days -- some of them will be immediately before sanctions are lifted as a condition precedent, some of them will happen immediately afterward.

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