OREANDA-NEWS. October 11, 2010. Corbiere Holdings and Raleigh Investments (affiliates of Norilsk Nickel) are no longer holders of a 7.2% stake in Norilsk Nickel that was held in treasury shares, according to Norilsk Nickel’s list of affiliates, reported the press-centre of OTKRITIE Financial Corporation.

A Vedomosti source in the company reports that these shares were converted to ADRs to ensure easier use of them for purposes of raising funds and conducting transactions. Alternatively, these shares could have been transferred to the company’s pension fund. Norilsk Nickel CEO Vladimir Strzhalkovsky was previously quoted by Reuters as saying that an 8.5% stake in the company held in treasury shares will be transferred to its pension fund. He stated that such a transfer would provide staff and all organizations of the pension fund with greater influence on company policy through their representatives on its Board of Directors.

View: Clearly such a development, regardless of whether the 7.2% stake was converted into ADRs or transferred to the pension fund, means that Norilsk Nickel’s management continues to bolster its control over the company. Generally speaking, these types of scenarios are negative in terms of corporate governance and transparency, and thus negative for minority shareholders.

Valuation and Action: We reiterate our BUY rating for Norilsk Nickel. The stock trades on a 2011E EV/EBITDA of 5.0x, which implies a 23% discount to peers.