Evraz Group Floats to Great Britain
// Roman Abramovich prepares a new metallurgical merger
Consolidation of British Corus with Russian Evraz Group may become the next large deal involving Russian metallurgical assets after the merger of Arcelor and Alexei Mordashov’s Severstal. Kommersant learned that the bidder for blocking shareholding of Evraz Group—governor of Chukotka Roman Abramovich—participated in talks with Corus to buy its shares. Experts say it is quite likely for Abramovich to initiate exchange of shares of both companies. In this case, Corus will get cheap raw materials from Russia, and Abramovich will become a key shareholder of Corus.
Sources at investment banks informed Kommersant that Abramovich began talks for acquisition “of a block of Corus shares less than a controlling stock.” According to Kommersant’s information, Abramovich resumed talks with Evraz Group owners about buying its blocking shares, approximately at the same time.
Evraz Group yesterday declared for the first time that the company’s owners informed the board of directors about their talks with Abramovich’s fund Millhouse Capital concerning selling “a considerable share” of Evraz Group to the fund. Evraz Group representatives do not disclose the details of the deal. Moreover, Evraz Group points out there are no agreements on the deal yet. Millhouse Capital, recently established to manage Abramovich’s Russian assets, told Kommersant they do not comment upon a deal till it is completed.
Corus Group is the seventh largest metallurgical company in the world. Its output reached nearly 19 million metric tons of steel in 2004, its profits made up £10.1 billion in 2005. Institutional investors own more than 80 percent of Corus shares.
Evraz Group is the leader of steel-casting in Russia. The output reached almost 14 million metric tons of steel and 12 million metric tons of mill products in 2005. The profits made up $6.5 billion. Alexander Abramov, Alexander Frolov, and Valery Khoroshkovsky control 82.31 percent of Evraz shares through Cyprian Crosland Global. 14.3 percent of shares circulate at London Stock Exchange as GDR.
Experts see a direct connection between the fact that Abramovich, who lives in Great Britain, is interested in Evraz Group and Corus, and the plans for the merger of these companies. Corus is now in a difficult position. Bloomberg informed yesterday that Corus’ net profit decreased by 73 percent in the first quarter of 2006 comparing to the first quarter of 2005 due to the growth of prices of energy and raw materials, and made up $85 million. According to Timothy McCutchen, partner of DBM Capital investment fund, any European company endeavors to obtain assets in countries where production costs are low, for instance in Russia. He believes Evraz would be a good match for Corus which needs sources of cheap raw material—slabs for making mill products. Experts in metallurgical sector note it has been nearly a year that Corus is considering to buy Evraz shares. Evraz was considering the deal as well, but found it unprofitable, and refused the idea.
Corus spokesman David Jackson refused to comment on a hypothetic deal with Abramovich. Meanwhile, according to McCutchen, the merger of Evraz and Corus may happen this way: Corus will emit extra shares and exchange them for Evraz stocks purchased by Abramovich. Kommersant’s British sources believe the merger of Evraz and Corus will allow Evraz to improve its financial results, and Abramovich will gain the image he needs in Great Britain – that of rescuer of local steel industry.
Kommersant’s sources close to Metalloinvest head Alisher Usmanov, who knows Corus well, also regard the merger of Evraz Group and Corus as quite possible. Usmanov sold his 13.4 percent of Corus shares in 2004, and earned $260 million (the shares had been bought for $295 million in 2003-2004). At that time, Corus did not want to allow Usmanov to manage the company, saying it would damage its interests and those of its shareholders. Apparently, Corus has now changed its attitude to Russian businessmen.
Maria Cherkasova, Dmitry Butrin, Natalia Skorlygina
All the Article in Russian as of June 01, 2006
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