Ukrainian analysts said a likely combination between the Mariupol Ilyich Iron and Steel Works and the Metinvest conglomerate would create one of the world’s top 20 steel firms.
Mr. Andrei Gerus, head of consulting at Concorde Capital, says Metinvest is currently the world’s 30th biggest steel producer. It is also the world’s seventh biggest iron ore producer. Metinvest has idle mining, coal and coking capacity and a well establish sales network and Ilyich has a convenient location for exports, so the synergy is clear. He said that the combination would create the FSU’s biggest metallurgical group.
Mr. Vitaly Shushkovsky, Renaissance Capital analyst, says Metinvest supplies more than 70% of Ilyich iron ore concentrate and over a quarter of its coke as it is. He said it was not clear how the takeover would come off, whether Metinvest would leave current management in charge at Ilyich or, if not, whether that management would be willing to go.
He added that Smart Holding became a Metinvest shareholder when this was taken over, but that option would not work here.
Mr. Ivan Kharchuk, Troika Dialog Ukraine analyst, said the likelihood of a combination between Metinvest and Ilyich had already pushed Ilyich shares up 20% and they had the potential to rise another 25%.
The steel mill quoted Mr. Volodymyr Boiko, its general director, as saying in a press release on June 15th that Ilyich could combine with Metinvest once the ownership of its shares has been resolved. He said that “We’re holding talks with Metinvest because, firstly this is a Ukrainian company and, secondly, it has raw material like ore, concentrate and coke. We for our part have a powerful enterprise and workforce.”
Mr. Boiko said “That combination can only be for Ukraine’s good, which is why we are holding these talks and I hope for a positive outcome, the main condition of any combination would be to protect the interests of employees and the city of Mariupol.”
He said, the company is grappling with the second phase of the financial crisis and that it must focus on survival. He added that “The companies that survive in these circumstances are those that have the production base, the raw materials and the streamlined sales system. Objectivity tells us that we must unite with a partner that has a raw material base.”
Commenting on the situation surrounding the stake held by the majority shareholder Ilyich-Stal, CJSC, Mr. Boiko expressed confidence that the situation would be resolved in favor of the steel maker. He said that “I don’t have any doubt that this problem will be resolved. I would like to observe that the decision we made back in 2008 to personalize the shares among the members of the tenant organizations will definitely be realized. People will receive their stakes.”
But it will take time to resolve that issue, and production won’t wait, particularly in crisis conditions. For that reason the issue of merging with Metinvest is being developed in parallel.
Representatives of two offshore companies claimed at the end of last month that a new owner bought 90.41% of Ilyich-Stal, which owns 90.41% of the Ilyich Iron and Steel Works, back in May 2009. The steel works itself denies selling and claims it was subject to a corporate raid. The matter has been taken up by the Ukrainian authorities. (Interfax-Ukraine)
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