Translated material
Mechel's coal will go to the stock exchange
As is known, Mechel-Invest acquired 75% minus one share of Yakutugol and 68.86% of Elgaugol shares at an auction in early October for $2.3 billion at a starting price of 1.84 billion (the lot included 75% minus one share of Yakutugol and 39.36% of Elgaugol shares owned by the Republican Investment Company, an SPV company with 100% participation of Yakutia, as well as 29.49% of Elgaugol owned by Russian Railways). OAO Southern Kuzbass, which the group owns, is one of the three largest Russian coal companies.
The purchases were not cheap for Mechel. Therefore, according to one version, the group will try to consolidate coal assets within a separate company, and then conduct an IPO in order to compensate for at least part of the costs of acquiring Yakutugol and Elgaugol. Mechel itself says that this is one of the options for developing the company’s mining division. As Ilya Zhitomirsky, a representative of the Mechel group, told Vremya Novostey, the entire mining business could be separated into a separate company, the shares of which are planned to be listed on the stock exchange. Mr. Zhitomirsky refused to name the exchange, but said that last week the main shareholder of Mechel, Igor Zyuzin, as part of the RUIE delegation, visited the Toronto Stock Exchange. According to him, investors may be offered up to a third of the shares of the spun-off company. “In any case, we will have a blocking package,” he added.
Mechel representatives have not yet officially spoken about what funds are planned to be raised through the IPO. As Interfax reported, citing a source familiar with the company’s plans, “during a possible IPO, Mechel plans to raise up to $2 billion.”
Investors were optimistic about the news about Mechel's upcoming IPO (ADRs for approximately 25% of the group's shares have been traded on the New York Stock Exchange since October 2004). On Friday, in the first five minutes of trading on the NYSE, the ADR price increased from $82.77 to $89.78 per receipt, and by the close of trading, quotes rose by 9.92%. This reaction is not surprising. Coal assets are now attractive for investment. Therefore, if Mechel does not delay the placement, the interest of Western investors in the IPO may be high. True, the company needs to carry out a number of legal procedures, in particular, to allocate assets, prepare international reporting, go through the listing procedure, etc. So the world may only learn about the new commodity player in mid-2009.
The Mechel Group consolidated controlling stakes in the Chelyabinsk Metallurgical Plant, the Southern Kuzbass Coal Company, Mechel-Energo, Korshunovsky Mining and Processing Plant, the Yuzhuralnickel Plant, Izhstal, the Beloretsk Metallurgical Plant, the Moscow Coke and Gas Plant, the Vyartsila Hardware Plant, trade port "Posiet", port "Kambarka". The group also includes metallurgical enterprises in Romania and Lithuania.