Open / Close Advertisement

Mittal Steel Acquires 93% Stake in Kryvorizhstal

10/01/2005 - Mittal Steel Co. NV has agreed to acquire a 93.02% stake in the capital of KryvorizhStal from the State Property Fund of Ukraine following a public auction.

Mittal Steel Co. NV has agreed to acquire a 93.02% stake in the capital of KryvorizhStal from the State Property Fund of Ukraine following a public auction.

KryvorizhStal is the largest carbon steel long products producer in Ukraine and the nearby region, with 2004 liquid steel production of 7.7 million tonnes and 2004 shipments of 6.7 million tonnes.It also produced 17.1 million tonnes of iron ore.

In 2004, the company had sales of US$1,897 million, EBITDA of US$551 million, EBIT of US$505 million and net income of US$378 million. The EBITDA margin was 29% in 2004. At June 30, 2005, the net cash position was US$413 million.

Under terms of the share purchase agreement, Mittal Steel will acquire 3,590,038,755 shares of the share capital of the company for a total consideration of UAH 24.2 billion (US$4.79 billion*). The transaction will be financed out of Mittal Steel's own cash resources and credit lines. In addition to its existing liquidity lines and cash balances, Mittal Steel recently signed a US$3 billion loan agreement with Citigroup with terms similar to its US$3.2 billion revolving credit facility.

This transaction marks another key milestone for Mittal Steel's business in Eastern Europe, which is an integral part of its European and global strategy. KryvorizhStal is a low-cost production platform with a strategic location, at the heart of a strong growth market. KryvorizhStal operates a single integrated steel plant located within a large iron ore mining complex (over a billon tonnes of iron ore reserves) assuring 90% of the company's requirements at low mining costs. KryvorizhStal is also almost self-sufficient in coke and is predominantly supplied by nearby coal mines. 80% of the total sales are exported through major ports near the plant, benefiting from a good rail transportation network. Kryvorizhstal has been modernizing its facilities and has already received ISO 9001 Quality Accreditation.

KryvorizhStal has a 10 million tonne crude steel capacity, but only 6 million tonnes of rolling capacity. This creates attractive debottlenecking opportunities with additional capacity that can be easily leveraged within Mittal Steel Co. KryvorizhStal thus has a high strategic value for Mittal Steel.

As a result of the transaction, Mittal Steel will be in a position to provide the company with technical production support, procurement assistance, sales and marketing support and management knowledge sharing. Mittal Steel believes that the synergies and future opportunities generated by the transaction will enhance long-term value for our shareholders.

The transaction is subject to regulatory approvals. Closing of the transaction is expected to be before year-end. UBS Investment Bank is acting as financial advisor to Mittal Steel on this transaction.

Commenting, Lakshmi Mittal, Chairman and CEO, Mittal Steel, said, "Strategically this is a key acquisition for Mittal Steel Company, as it provides us with a large size low-cost production platform in a core and fast growing market. KryvorizhStal is a high quality steel and mining asset and we are confident that we can help the company expand further by providing our marketing, procurement and technological knowledge and expertise.
KryvorizhStal is today a good quality asset. We are excited about the prospects of accelerating its growth.

"KryvorizhStal could over the years become our largest steel plant in the region and offers significant flexibility regarding the development of its product range. KryvorizhStal will add valuable mining reserves to the group. Overall, we expect to generate over US$200 million of pre-tax synergies by the end of 2006."

Mittal Steel is the world's largest and most global steel company, with operations in fourteen countries, on four continents. Mittal Steel encompasses all aspects of modern steelmaking, to produce a comprehensive portfolio of both flat and long steel products to meet a wide range of customer needs. It serves all the major steel consuming sectors, including automotive, appliance, machinery and construction.