Translated material
Fought for scrap metal
Vladimir Lisin buys Maxi-Group instead of Alisher Usmanov
Vladimir Lisin's Novolipetsk Metallurgical Plant turned out to be the very player because of which Alisher Usmanov's structures abandoned their intention to acquire the Maxi-Group company. On Thursday evening, Mr. Usmanov's Gazmetall announced the cancellation of the agreement to purchase a 50 percent stake in Maxi-Group from its main owner Nikolai Maksimov due to the fact that the seller continued to conduct parallel negotiations with another partner. On Friday it became known that Mr. Maksimov chose to sell a controlling stake in his enterprise to Vladimir Lisin."Maxi-group" includes two main divisions - OJSC "Metallurgical Holding" (production division) and CJSC "Uralvtorchermet" (raw materials division), which form a closed production cycle from the collection and processing of scrap ferrous metals to the production of high-value metallurgical products . The group includes the Nizhneserginsky hardware and metallurgical plant and the Revdinsky pipe plant. The group is implementing a project to build mini-mills across the country for the production of rolled steel from scrap metal. By the end of 2012, it is expected to increase the steel production capacity to 12.5 million tons, rolled steel production capacity to 11 million tons, and scrap collection and processing capacity to 15 million tons.
Mr. Maksimov's problems, which forced him to begin negotiations to sell part of his business, worsened two months ago. At the end of October, he even sent a letter to President Putin, where he reported that a number of banks working with the company refused to issue loans to it, citing a liquidity crisis in the banking sector. “Credit lines for Maxi-Group enterprises have been opened in 50 banks, the total amount of borrowed funds is 38 billion rubles,” the appeal noted. He also spoke about the possibility of stopping the group’s enterprises due to the fact that all the company’s working capital is used to pay off debt.
The request for help was heard; Alisher Usmanov was the first to respond. He offered Mr. Maksimov to sell 50% of the company's shares. The agreement provided for investments by Gazmetal shareholders in the working capital of Maxi-Group, as well as the provision of credit resources for business development. In early November, Mr. Maksimov signed an agreement with Mr. Usmanov’s company, Gallagher Holdings, to sell a 50% stake in Maxi-Group (Mr. Maksimov owns 99.99% of this company). The cost of the transaction was not disclosed, but it is possible that it was this that forced Mr. Maksimov to look for an alternative buyer.
On Thursday, Gazmetall announced that the company was terminating its agreement with Mr. Maksimov. “This decision (to continue negotiations with another partner. - Ed. ) does not correspond to generally accepted business norms, and therefore Gazmetall announces the cancellation of the agreements reached and is studying the possible legal consequences of Maxi-Group’s failure to fulfill its obligations under this agreement ", - emphasized in the statement of Gazmetal.
Unlike Gallaher, which claimed half of the Maxi Group, NLMK agrees to at least a controlling stake. The agreement between them provides for the purchase of 51% plus one share of the group, the “immediate” provision by the Novolipetsk Iron and Steel Works of a loan of approximately $400 million, the refinancing of the debt of Maxi-Group’s subsidiaries, as well as the financing of its investment program for the construction of a network of steelmaking and rolling production facilities of a common with a capacity of up to 10 million tons of finished products per year. NLMK will provide funds to finance the transaction from Alfa Bank. “It is expected that the deal with Maxi-Group will be closed before the end of this year and must be approved by the NLMK Board of Directors,” explained a NLMK representative.
Experts estimate the value of the controlling stake in Maxi-Group at $0.5-1 billion. This wide range is explained by the fact that the group is in a pre-bankruptcy state and, according to some reports, its controlling stake could be transferred to NLMK in exchange for loans and financing , which are provided for in the transaction.
The only thing that darkens Mr. Maksimov’s joy is that now he may have to pay a penalty to Mr. Usmanov, because Gazmetal, according to his message, has already begun to implement its obligations. But it is unlikely that Mr. Maksimov, when concluding an agreement with NLMK, did not think about this.