THE crucial shareholders’ meeting at Norilsk Nickel, the world’s largest
nickel and palladium miner, had not gone in favour of Oleg Deripaska. But
Russia’s richest man seemed unfazed as he strolled into a wood-panelled
conference room framed with large maps and antique books at Basic Element,
his £11 billion investment company.
Soft-spoken and wearing a blue shirt emblazoned with his initials, he appeared
steely calm as he discussed his ambition to see his company Rusal, the
world’s largest aluminium producer, merge with Norilsk – a plan that
suffered a setback at last week’s board meeting when shareholders resisted
attempts to have three of Deripaska’s men elected to Norilsk’s board.
Deripaska has been trying to buy a blocking stake in the firm held by Mikhail
Prokhorov, who is in the middle of an acrimonious “divorce” from Vladimir
Potanin, his business partner of 15 years and Norilsk’s other principal
shareholder.
If Deripaska gets his way he would create a £50 billion mining giant capable
of rivalling Rio Tinto and BHP Billiton. Potanin, however, is said to be
against the merger and last week’s board vote was seen as a key test for
Rusal’s potential takeover.
The arm-wrestling over Norilsk is also pitting Deripaska against Alisher
Usmanov, the owner of Metalloinvest, who last year bought 24% of Arsenal
football club and who is now seeking a merger with the nickel giant.
Prokhorov, who is understood to be unhappy with a clause in Deripaska’s
deal, could be close to clinching a new agreement with Usmanov.
Far from appearing frustrated, however, Deripaska broke into a relaxed smile
at the mention of Norilsk. “Everything will be clear next week,” he said in
an interview with The Sunday Times.
“Yes, I’m interested in a merger because Norilsk is a good company but it’s a
complex project. It’s not an easy job but there is a synergy between Norilsk
and Rusal. There’s great potential to grow.
“I haven’t heard that Potanin is against a merger. He is a reasonable man and
he wants to look at the real figures. It’s not about rivalling other
companies around the world. It’s about growing in Russia.”
According to the latest list of the world’s wealthiest people compiled by
Forbes magazine, Deripaska, who recently turned 40, is now worth £14
billion, making him the richest of Russia’s 87 billionaires and more than £2
billion better off than his close friend Roman Abramovich, owner of Chelsea
football club.
Deripaska laughs off the claim, saying there are several Russians richer than
him. “There is a Russian saying that money does not like attention and I
don’t see why one should count other people’s money,” he said. “The only
thing that has changed since the claim that I’m Russia’s richest man is that
my people now tell me that everything appears to have become more expensive
for Basic Element.”
Russia’s richest man or not, what is beyond doubt is that Deripaska is far
from feeling he has reached his peak. He says he normally works a 16-hour
day and spends most of his life in his office or on a plane crisscrossing
Russia and the world to attend meetings and visiting factories.
Deripaska’s group has moved into aluminium production in Nigeria and China and
signed agreements to produce coal in Kazakhstan. Basic Element also holds a
25% stake in Austria’s Strabag and a 10% stake in Germany’s Hochtief, two
construction companies, and a 20% stake in Magna International, the Canadian
automotive group.
Founded 11 years ago, Basic Element now holds assets in timber, mining,
manufacturing, financial services, construction and aviation, and owns or
co-owns companies that employ some 300,000 people on five continents. Last
year Rusal postponed preparations for a flotation in London, a decision
Deripaska said was dictated by the negotiations over Norilsk and by market
conditions.
Despite his group’s rapid overseas expansion, Deripaska is bullish about
Russia. “I see the company expanding mostly in Russia over the future,” he
said. “There are better opportunities here. I’ll invest abroad only in very
specific cases, for instance to get into a good coal or bauxite deposit, but
when you compare the prices with the same opportunities in Russia, it’s much
easier to do it here.
“Do people really know what’s going to happen in the future in emerging
markets in terms of business? Here we feel there is predictability and
stability. In my view Russia is the best place to invest in the world right
now.”
Less than two years ago, Deripaska, who owns a £25m mansion in London’s
Belgravia and learnt to speak English at the London School of Economics,
bought LDV, the Birmingham van manufacturer, but has no plans to expand
further in Britain.
“It’s too expensive to invest in Britain,’ he said. “You have very good people
there, very good engineers and specialists, but it’s a very tough market. I
spend very little time in London. I haven’t visited my friend Roman’s
stadium since last summer. I have no time. It’s crazy.”
Even for a country that has spawned nearly 100 billionaires in less than two
decades and is long used to rags-to-riches stories, Deripaska’s rise is
remarkable. Born in the city of Dzerzhinsk, close to Moscow, he moved at the
age of four with his widowed mother, an engineer, to a traditional Cossack
village near Krasnodar, in southern Russia.
When his mother had to move to work in another city he stayed with his
grandparents, living off the land, milking the family’s cows and fetching
water from the well. When his grandparents died, the state seized their home
as part of a programme of breaking up Cossack settlements.
“I was seven but I remember it very well. It was a difficult time,” said
Deripaska, a keen horse rider who now owns a mansion close to Krasnodar and
remains deeply attached to Russia’s south and its Cossack villages.
For seven years he moved from relative to relative before living again with
his mother.
At university he studied quantum physics. As the Soviet Union collapsed and
new opportunities opened up, Deripaska joined a metals exchange as a trader.
At 25, Deripaska went on to become director-general of the Siberian Sayansk
aluminium plant. “I was a plant manager, studying the business as a whole,”
he said. “This is very important. Many people came in at the top and do not
know what’s happening on the floor.
“I made my way from the bottom and I learnt to deal with problems. In 1994,
for instance, we had a crisis. We didn’t have enough raw materials but we
managed to change technologies when lacking almost everything, at times even
power.”
It was also a very dangerous time to be in business, when rivals were
routinely dealt with by contract killers, and when mafia clans, corrupt
state officials, ruthless entrepreneurs and former KGB officers fought over
the spoils of communism. The aluminium sector was highly lucrative but also
deeply murky.
In one attempt at a hostile takeover, Deripaska’s commercial director was
seriously wounded.
The tough young trader turned businessman came out on top of the so called
“aluminium wars”. In 2000 Abramovich bought up most of the holdings in
Russia’s aluminium industry and merged them with Deripaska’s company to
create Russian Aluminium (Rusal). Abramovich later sold his stake to
Deripaska, who since then has been undisputed king of one of Russia’s most
profitable industries.
“I’m always asked the question, how did I do it? A lot of hard work. The key
for me was learning the business from the factory floor,” said Deripaska,
who had just returned from a Kremlin meeting between Russia’s biggest
entrepreneurs and Dimitry Medvedev, the country’s next president.
“Yes, Russian business has developed fast but there is no miracle here.
A person who studied physics can also easily learn marketing, business and
so on. It’s not rocket science.”
Controversy still lingers, however. Mikhail Chernoy, a former associate of
Deripaska’s and one of the early movers in Russia’s post-Soviet aluminium
industry, has tried to sue Deripaska claiming that he owes him 20% of Rusal.
Deripaska is adamant that he owes him nothing and denies there was any
partnership.
The US State Department has revoked a visa it had granted Deripaska and is
still refusing him entry to America for reasons it will not disclose.
Deripaska, who is said to blame the problem on muck-raking business rivals,
would not comment on the issue and said he hoped to see the matter resolved
in the near future.
There can be little doubt that Deripaska – who is said to be on very good
terms with Vladimir Putin, the outgoing president, and Medvedev, the man
Putin chose as his successor – is well regarded in the Kremlin, not least
because he is spearheading the government’s multi-billion-pound investment
in Sochi, the site of the 2014 winter Olympics – one of Putin’s pet projects.
Deripaska’s group is to renovate the Black Sea resort’s airport and build
several Olympic facilities, investing some £1.2 billion to develop the
region. Deripaska also plans to invest some £1.5 billion a year to improve
Russia’s ailing infrastructure, mainly by building roads and airports. A
firm believer in bringing in foreign technology, expertise and investment,
Deripaska and several foreign companies are involved in a £5.6 billion
project to build a section of ring road round St Petersburg.
Complaining that salaries in Moscow are too high and people too lazy,
Deripaska said that, if he could, he would move the Russian capital to
Novosibirsk in Siberia, where, he said, “people are less spoilt”.
“Russia needs more time, he said. “Leading developed countries have business
histories going back hundreds of years and companies that are 50 years old.
The stance abroad among investment banks is simple. They want to pay less
when investing here. And I always say why? We are more profitable, we have
more opportunities to grow – why a discount? I can grow 20% a year, why
should you pay less?
“We are trying to create good companies that will be competitive in 50 years.
And I have no doubt that Rusal will still be around and in very good shape.
“Russia has great potential and tremendous opportunities. I truly believe that
it’s the best place to be in as a businessman.”
METAL MAKER
UNITED Company Rusal was created last March via the merger of two Russian
aluminium giants, Rusal and Sual, with the alumina assets of Swiss group
Glencore.
UC Rusal accounts for almost 12% of the global output of primary aluminium
(4.2m tonnes annually) and 15% (11.3m tonnes annually) of alumina, the key
component in the manufacture of aluminium metal. It also produces 72,000
tonnes of aluminium foil.
The group’s assets include 12 alumina refineries, 15 aluminium smelters, three
foil mills and seven bauxite mines.
