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Mechel Announces Acquisition of Donetsk Electrometallurgical Plant
12/27/2011 - Mechel OAO completed on December 23, 2011, the acquisition of 100% of the shares of Donetsk Electrometallurgical Plant (DEMZ AO). The acquisition is valued at $537 million.
Mechel OAO completed on December 23, 2011, the acquisition of 100% of the shares of Donetsk Electrometallurgical Plant (DEMZ AO). The acquisition, which had been approved at Mechel OAO’s annual shareholders’ meeting and by the Mechel’s Board of Directors, is valued at $537 million.
DEMZ, one of Ukraine’s most modern steelmaking plants, has an annual capacity of over 1 million tonnes. The plant focuses on the production of continuously-cast billets as well as rolls of specialty steels, including thermally treated. The enterprise has a firm market standing as a producer of high-quality rolls, including the production of large-diameter specialty-steel pipe, which is exported to the United States and Europe.
The plant’s electric furnace smelting facilities are currently working at full capacity, producing up to 90,000 tonnes of steel per month. Total steel production is expected to total over 1 million tonnes in 2011, with production of hot-rolled products planned to top 145,000 tonnes for the year. Equipment at the plant’s rolling mill enables it to produce rolls using various types of thermal treatment, including hardening and tempering, annealing and normalization. These products are in demand on the international market for high-tech industries, engineering and shipbuilding.
“Acquisition of Donetsk Electrometallurgical Plant is a logical step for the company as we pursue our strong partnership and investment ties with the Ukrainian plant,” noted Mechel OAO’s Chairman of the Board of Directors Igor Zyuzin, commenting on the deal. “This is a new level of development for Mechel Group’s steel division, aimed at increasing the Group’s total production volume and, which is particularly important, the share of high margin products in the group’s product portfolio. This will not require a significant withdrawal of Mechel’s funds at present and in the nearest future, which will have a positive effect on the Group’s cash flows."
DEMZ’s quality management system is compliant with the international ISO 9001:2008 standard as certified by Lloyd’s Register Quality Assurance, while the ecological management system is compliant with the ISO 14001:2004 standard as certified by TUV NORD CERT.
The DEMZ plant’s advantageous geographic location, well-developed railway network and proximity to major seaports at Mariupol (115 kilometers) and Odessa (900 kilometers) enables it to make efficient deliveries of steel products to more than 30 countries.
Mechel will pay for DEMZ AO’s shares in installments over 7 years. At the time of Mechel’s annual shareholders’ meeting, payment was expected to be paid in installments over 4 years, but over the course of completing the acquisition, the term was extended by 3 years without increasing the total consideration.
Mechel, one of Russia’s leading companies, conducts business in four segments: mining, steel, ferroalloy and power. Mechel unites producers of coal, iron ore concentrate, nickel, ferrochrome, ferrosilicon, steel, rolled products, hardware, heat and electric power, and its products are marketed both domestically and internationally.
