Alexey Mordashov's Severstal will be the fourth largest steel producer in the U.S. by production volume after the deal is completed.
Photo: Valery Melnikov
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ArcelorMittal Gives Severstal a Discount
Severstal has overcome stiff competition to reach an agreement with ArcelorMittal on the purchase of the Sparrows Point steel mill near Baltimore, Maryland, in the United States. The Russian company bought the mill for $810 million. Last year, the E2 Acquisition Corp. consortium agreed to purchase the mill for $1.35 billion, but was unable to raise the money. The sale of the mill was one of the conditions placed on the merger between Arcelor and Mittal Steel by American antimonopoly authorities. Severstal stock gained 0.87 percent on the RTS on Friday.
Severstal was interested in Sparrows Point last year, when E2 won it. E2 is made up of the American companies Esmark Inc. and Wheeling-Pittsburgh Steel Corporation, the Brazilian CVRD (now Vale) and the Ukrainian Donbass Industrial Union. The current deal is expected to be completed by the end of the second quarter of the year. It will make Severstal the fourth largest steel producer in the U.S. by production volume. Sparrows Point is the only steel producer in the U.S. that uses its own raw materials and has direct access to the ocean. It also has its own 120-MW electric plant. The mill has a capacity of 3.6 million tons of steel per year. In 2007, it produced 2.3 million tons and its profitability was less than 5 percent.
A source close to the seller said that Severstal's offer was far from the best it received. The source said that a consortium of the Russian Magnitogorsk Iron and Steel Works and the Indian Essar offered cash and stock in their joint venture worth $1.6 billion, and the mill's union (United Steel Workers) played a significant role in the choice of Severstal. The Ukrainian Privat group is said to have bid $860 million and the Russian Novolipetsk Steel less than $800 million. Analysts sayits new acquisition should increase Severstal's receipts by 7 percent and its EBITDA by 5 percent.
www.kommersant.com
All the Article in Russian as of Mar. 24, 2008
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