Oct. 9 – Russia’s Evraz is to take control over coal miner Raspadskaya after acquiring half the stake of the Cyprus-based investment vehicle, Corber Enterprises. This US$800-million deal will enable the steelmaker to sufficiently run the coal-coking business as well as turning it into Russia’s largest steel-component producer.
Although Evraz did not specify the total price tag for the deal, it is said to have paid about US$202 million in cash, and the rest in new shares and warrants. At current prices, it is approximately just under US$800 million.
Russia’s biggest steelmaker already had effective control over the coal miner with a 41 percent stake through a holding company.
The London-listed Evraz is partly owned by Russian tycoon and Chelsea soccer club owner, Roman Abramovich. He said that the company would increase its share in the mining business to 82 percent by acquiring half the share of Corber. The remaining 18 percent stake is listed on Moscow’s MICEX stock exchange.
The deal is due to be completed by the end of this year with all Raspadskaya’s managers to remain in control until at least the end of 2013.
CEO of Raspadskaya, Gennady Kozovoy, said in a company’s statement that its chairman Alexander Vagin and others will exchange their shares in the coal miner for shares in Evraz.
The deal will not only help Evraz overtake rival Mechel as Russia’s top coking coal producer, but will also boost its reserves.
Some analysts questioned the intention of Evraz’s splashing out on a company it has already had control over when the market is uncertain.
Credit Suisse analysts put the premium to Raspadskaya’s current share price at 15 percent, while RMG analysts said that based on the enterprise value of both companies, Evraz would pay a premium of around 20 percent, Reuters reported.
According to the WSJ Market Watch, Evraz will issue 132.7 million new shares representing 9.9 percent of the existing issued share capital of the company. It will further issue 33.9 million new warrants to subscribe for 33.9 million new shares representing 2.53 percent of the existing issued share capital of Evraz.
Raspadskaya, located in the Siberian Kemerovo region of Russia, is Evraz’s key coal supplier and one of country’s largest coking coal mines based on production capacity in 2011 with proven and probable coal reserves of 1.3 billion tons.
Total proved and probable coal reserves of Yuzhkuzbassugol, Evraz’s existing supplier of coking coal, is estimated at approximately 632 million tons.