Rautaruukki Corporation (Ruukki) and funds managed by CapMan (CapMan) have agreed to combine units of Komas and units of Ruukki Engineering division to form a new company to be called Fortaco; it will be Europe’s largest actor in its field, the companies say.

Ruukki’s ownership in the company to be formed will be 19%, and in addition Ruukki will receive a cash payment of around €25 million and equity-linked securities worth around €81 million in the company - totaling around €114 million, which corresponds to the total value of assets which Ruukki will transfer to the new company. Completion of the transaction is subject to approval from the competition authorities and is expected to be finalized by early December 2012. The transaction will not affect Ruukki’s financial reporting before the arrangement is finalized.

"The engineering industry sub-suppliers are expected to provide increasingly stronger cost-competitiveness in component deliveries as well as specialized know-how. This new combination will have efficient component production units located near the customers’ markets. Success of the new company will be essential for Ruukki as regards both the development in steel volumes and the expected return on invested capital" says Sakari Tamminen, President and CEO of Rautaruukki Corporation.

Fortaco is expected to generate pro-forma net sales of approximately €270 million in 2012 and will have a total of approximately 2,600 employees. The company will be formed from the compatible and complementary units of Ruukki and Komas. Ruukki Engineering units in Jaszbereny (Hungary), Wroclaw (Poland) and Holic (Slovakia) as well as Kurikka, Sepänkylä and the Kalajoki component business (Finland) will transfer to the new company. Net sales of the units contributed by Ruukki totalled €158 million in 2011. Net sales of the Ruukki Engineering units excluded from the transaction totalled some €100 million in 2011. Employees of the units concerned will transfer to the new company on their current employment terms and conditions as "old employees". Komas will contribute with its units in Janow Lubelski (Poland), Narva (Estonia) and Sastamala, Kurikka, Parkano and Härmä (Finland).

"In future, Ruukki will focus on developing the construction and special steels businesses. The construction market offers substantial growth potential, especially in Russia and the rest of the Eastern Europe. We also see good business opportunities in the residential construction and construction of energy-efficient buildings, particularly in Northern Europe. In the special steels business, we will expand our international distribution and service network," adds Tamminen.