Russia's Prokhorov favours RUSAL, Norilsk merger

BERLIN, July 12 (Reuters) - Russian billionaire Mikhail Prokhorov told a German magazine at the weekend that he was in favour of merging metals giants United Company RUSAL and Norilsk Nickel (GMKN.MM).

Prokhorov, Russia's richest man, has a 14 percent stake in RUSAL, after selling his stake of 25 percent plus two shares in Norilsk to RUSAL last year in exchange for the stake and $7 billion.

He had said before that a merger of the two firms was "inevitable" and would maximise their competitiveness.

"I am in favour of merging RUSAL and Norilsk Nickel. That is the only way to compete against sector giants like BHP Billiton or Rio Tinto," Prokhorov told German weekly Der Spiegel.

He told teh magazine that RUSAL's $4.5 billion debt to state bank VEB could be transformed into a stake in a combined group.

"In such a combination, each of the big shareholders would hold a maximum of 15 to 20 percent," Prokhorov said.

"These strong shareholders would have to put an independent management in place. That would be a radically new strategy for Russian industry."

The billionaire shareholders in the two companies had proposed merging the firms to create such a giant, with the state possibly taking a stake. But the plans were shelved when the financial crisis hit.

A merger between Norilsk the world's largest nickel prodcuer and UC RUSAL, the biggest aluminium producers, would potentially create a Russian metals giant to rival world leader BHP Billiton. (Reporting by Noah Barkin; additional reporting by Robin Paxton; editing by Karen Foster)