April 16, 2010, 03:00 / Business

Severstal will compete with Lakshmi Mittal again

Anna Peretolchina Kristina Pavlova Alisa Fialko

"Zaporizhstal"

Iron and Steel Works. The main beneficiaries: co-owners of Midland Group Eduard Shifrin and Alex Schneider (about 50%), Igor Dvoretsky and Vitaly Satsky (about 40%). Capitalization – UAH 13.91 billion ($1.75 billion, Ukrainian stock exchange). Revenue (USBU, 2008) – UAH 13.64 billion (about $1.72 billion). Net profit – 47.66 million UAH ($6.02 million).

Severstal will compete with ArcelorMittal and South Korean Posco for control of Zaporizhstal, which produces 11% of Ukrainian steel. Posco announced the interest of all three candidates yesterday (its statement was quoted by Bloomberg and Asia Pulse). According to agencies, the sale of the stake could take place in June. But so far everything is “at the very initial stage,” Asia Pulse reports the words of a Posco representative.

According to Interfax, control in Zaporizhstal is being sold by its main owners - Ukrainian businessmen Eduard Shifrin, Alex Schneider, Igor Dvoretsky, Artur Abdinov and Vitaly Satsky (in total they have more than 90%). They have been trying to sell the asset for more than three years; According to Ukrainian media, Zaporizhstal was offered to Metalloinvest and NLMK, while ArcelorMittal and the Ukrainian Metinvest were interested in the asset. But a deal never came to fruition.

Yesterday, a representative of Metalloinvest told Vedomosti that the company is not interested in Zaporizhstal. Representatives of Severstal, NLMK and ArcelorMittal declined to comment; their colleagues from Metinvest and Posco did not answer Vedomosti’s questions. But it was not possible to find representatives of Zaporizhstal shareholders.

Zaporizhstal, created back in the 1930s, is one of the five largest steel producers in Ukraine (3.9 million tons of steel and 3.2 million tons of rolled products in 2008). But its main problem is the lack of raw materials and serious wear and tear of equipment (about 70%), notes Evgeniy Oksha, an analyst at the Ukrainian investment company Socrates.

On news of a possible sale, Zaporizhstal yesterday rose in price by 19.6% to $1.75 billion (Ukrainian Exchange, Bloomberg data).

Capitalization may rise to $2 billion: a change of owner is positive news, because investments in modernization are expected, notes Elena Evdochenko, head of the analytical department of Prospect Investments. The fair value of Zaporizhstal is $1.2–1.5 billion, Oksha believes, but the price of a 51% stake could reach $900 million, taking into account a 30% premium for control.

However, experts cannot assess which candidate the current owners of Zaporizhstal will prefer.