in 2010

the international cooperation

The owner of Severstal, Alexey Mordashov, together with the top management of Arcelor, on Saturday announced the details of the merger of the companies. At the same time, the businessman emphasized that there was no political component to the deal and it did not require approval from the authorities. However, industry experts claim that Mr. Mordashov was allowed to sell his company to a large international concern only because he joined the circle of businessmen especially close to Vladimir Putin. Along the way, the Russian authorities, on the eve of the G8 summit in St. Petersburg, sweetened Moscow’s tough position on gas supplies for Europe.

Speaking on Saturday together with the Chairman of the Board of Arcelor Guy Dollet and the Chairman of the Board of Directors of the company Joseph Kinsch at a press conference in Moscow, Alexey Mordashov said that in order to finance the deal with Arcelor, which requires an additional payment of €1.25 billion in cash, he is forced to attract a bank loan secured by purchased package. As the businessman explained, for three years he will use dividends on Arcelor shares to repay the loan. Let us note that Mr. Mordashov transfers essentially all his assets to the company, thus depriving him of income from them for the next three years (during which he will repay the loan). In Russia, the businessman actually only has shares in OJSC Severstal-Auto (49.3%), as well as shares in Ren TV (more than 30%) and Severstal-Transe (about 50%).

Meanwhile, Mr. Mordashov admitted that he wants to increase his stake in Arcelor to 45% in the future. According to an agreement with the company, he can do this only after four years, while there is a five-year ban on the sale of Arcelor shares already owned by Alexey Mordashov. If a Russian businessman receives more than 45% of the company's shares, he will have to offer the remaining Arcelor shareholders to sell their shares “at a fair price.” In addition, Mr. Mordashov agreed to restrictions in the management of the company - he pledged to vote at the meeting of shareholders strictly in accordance with the recommendations of the board of directors, in which the businessman’s representatives would own only a third of the seats. That is, having become the main shareholder of Arcelor, he, at least in the short term, will actually be a nominal shareholder without any special rights.

Let us note that Mr. Mordashov made the first attempt to merge Severstal with Arcelor and, in fact, thus withdraw almost all of his capital abroad, back in 2002. Then the negotiations failed. Guy Dollet claims that the partners could not agree for purely economic reasons. However, Kommersant's sources in government agencies claim that Alexey Mordashov was simply not allowed to sell the company. But the situation has changed - recently Alexei Mordashov has been called one of the most loyal entrepreneurs to the Kremlin. Not the least role in this, according to Kommersant, was played by the fact of his rapprochement with President Vladimir Putin’s personal friend Yuri Kovalchuk. In the 90s, the business interests of Vladimir Yakunin (now president of Russian Railways OJSC), Andrei Fursenko (Minister of Education of the Russian Federation), Vitaly Savelyev (deputy head of the Ministry of Economic Development) were connected with the St. Petersburg Bank Rossiya controlled by him in the 90s. It is not surprising that Severstal's lobbying capabilities have recently increased noticeably, especially after this company has provided the authorities with a number of valuable services. Thus, last summer, Severstal acquired, in the interests of the Kremlin, a stake in the Ren TV television channel, and at the end of last year, an 18% stake in OJSC TRK Petersburg.

In addition, the deal between Severstal and Arcelor turned out to be very useful on the eve of the G8 summit, in which Russia will be the host for the first time. Against the backdrop of worsening relations between Moscow and the European Union over gas supplies to Europe, the merger of metallurgists is intended to demonstrate to European officials the openness and transparency of Russian business. A number of experts interviewed by Kommersant simply called the deal “a sop from Russia to the European Union.”

Mr. Mordashov himself stated that there is no politics behind the deal, and by transferring assets to a Luxembourg company, he is not trying to insure the business against political risks in Russia. “There have never been these signs (of political risks— Kommersant ) in Russia, and all these fears are far-fetched,” the businessman assures.

Other Russian metallurgists, in turn, say that Mr. Mordashov has pushed the industry toward integration, but they doubt that the Kremlin will allow them to export capital as successfully. Therefore, many of them place the main emphasis on internal consolidation. According to the co-owner of Metalloinvest and Gazmetal, Alisher Usmanov, he has already negotiated this with the main owner of EvrazGroup, Alexander Abramov, and with the owner of the Novolipetsk Iron and Steel Works, Vladimir Lisin. “We don’t yet have negotiations that could end with such a big deal as Mordashov made,” states Mr. Usmanov. “But we are ready for them.” Mr. Usmanov also did not rule out hostile takeovers and called the Magnitogorsk Iron and Steel Works a potential “victim.” Alexander Abramov also admitted that Russian metallurgists are negotiating possible mergers of assets.

MARIA Kommersant-Cherkasova, Elena Kommersant-Kiseleva, Konstantin Kommersant-Benyumov

Alexey Mordashov may increase his stake in Arcelor