Translated material
Asset spillover
Severstal consolidates the group's mining enterprises
OJSC Severstal announced yesterday the start of consolidation of its mining assets and those controlled by the Severstal group (see information) . The first step towards the implementation of these plans will be the issue of an additional issue of shares of OAO Severstal in the amount of 72% of the current authorized capital of the company. These papers will be exchanged for shares of mining companies. Experts believe that Alexey Mordashov’s group is streamlining its structure in this way, which will cause an increase in capitalization. And this, in turn, is necessary either for listing on Western sites, or for reducing interest rates on attracted loans.The board of directors of the OJSC, which recommended the shareholders meeting on March 27 to approve this decision, voted for the sale of shares of the additional issue of the Cyprus company Frontdeal, which is believed to belong to Mr. Mordashov. Frontdeal can pay for Severstal shares with blocks of shares or shares in the capital of mining companies it owns. In addition, other shareholders of Severstal OJSC were invited to participate in the repurchase of shares of the additional issue in order to maintain their shares in the company through closed subscription. At the second stage (after the placement of shares), the shareholders of Severstal OJSC will have to determine the conditions for the merger of mining companies into the OJSC. The merger will take place after approval from the relevant regulatory authorities, Severstal said in a statement. The consolidation process is expected to be completed by the middle of this year. According to a source at Severstal, there is no talk yet about further transfer of assets to a single share.
The report states that the market value of mining companies belonging to the Severstal group will be determined by the board of directors of OJSC Severstal, taking into account the results of assessing the value of these companies by an independent appraiser, Rosexpertiza. However, the volume of the additional share issue indicates that the assessment has been made. And if we evaluate assets based on the coefficient of the current value of Severstal shares on the market (on the RTS - about 12.5 dollars per share), then it seems that the company itself estimates the assets consolidated with it at approximately 3 billion dollars.
Sergei Suverov, head of the market analysis center at Gazprombank, believes that one of the explanations for the transfer of mining assets to OJSC may be the desire of the Severstal group to keep up with competitors in terms of mobility and raw material independence.” And Irina Lozhkina from the Prospekt Investment Group is convinced that this is the first step towards realizing Severstal’s ambitions of becoming one of the ten largest global steel producers (Alexey Mordashov spoke about this earlier). “Surely, they will expand through the acquisition of international assets,” says Ms. Lozhkina, “and they will most likely have to borrow for this. Consolidation of mining assets will allow Severstal to attract cheaper money for these purposes. And if they can buy something interesting, then later they will be able to locate more profitably on Western sites.”
However, yesterday, following the announcement of the intention to consolidate mining assets and issue an additional issue, Severstal shares fell on the RTS by 6.59%, to $12.05.
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In exchange for the new issue of Severstal shares, Frontdeal will contribute to the authorized capital of Severstal blocks of shares or shares in the capital of the following companies: LLC Holding Mining Company, LLC Investment Company Kuzbassugol, Pechoraugol, Olkon-invest, "Terra", "Impulse-consult", "Vorkutaugol", "Vorgashorskaya Mine", "Pervomaiskaya Mine", "Berezovskaya Mine", Olenegorsk GOK.