IUD in merger with Russian Gazmetall

From today's London "Times"

"Gazmetall in talks with rival to forge steel world-beater
Tony Halpin in Moscow

One of the biggest Russian metals companies is in talks with a Ukrainian rival to form an iron and steel giant worth up to $20 billion (£10.3 billion).

Gazmetall, which is half-owned by Alisher Usmanov, one of the wealthiest men in Russia, is negotiating a merger with the Industrial Union of Donbass (IUD) to create a company capable of producing 20 million tonnes of steel a year.

The new company could overtake SeverStal, which is controlled by the billionaire Alexei Mordashov and is the biggest Russian steelmaker, producing 17.6 million tonnes annually.

Officials at Metalloinvest, the company that manages Gazmetall’s assets, confirmed that discussions with IUD were taking place.

The newspaper Kommersant, which is owned by Mr Usmanov, reported that a letter of intent had been signed and that Gazmetall would control the merged company. Maxim Basov, the chief executive of Gazmetall, said that the companies had agreed to "tighter commercial, financial, investment and strategic cooperation". Merger proposals are being examined and will be put to shareholders within months.

Mr Usmanov has long advocated the creation of an iron and steel conglomerate combining assets in several republics of the former Soviet Union to compete worldwide. Metalloinvest company strategy holds that a Eurasian mining and metals company with facilities in Russia, Ukraine and Kazakhstan would "not only enhance the effectiveness of the industry and attract large investments, but also enable it to become a world leader".

Gazmetall already controls 40 per cent of Russian iron ore production and its plants turn out more than six million tonnes of steel a year. Mr Usmanov and his partner, Vasili Anisimov, tried to add Magnitogorsk Metallurgical Complex, the largest ferrous metals producer in Russia, to the group in 2005 but were rebuffed, despite blocking supplies of raw materials to the plant for a time.

IUD produces more than nine million tonnes of steel at three plants and is the second-largest corporation in Ukraine, with net profits of $390 million in 2005. The merged company would produce 15 million tonnes of steel annually and 38.1 million tonnes of iron-ore concentrate. IUD also owns steel plants in Hungary and Poland."

I have posted previously about how battles between Ukrainian financial industrial groups, in particular Rinat Akhmetov's SCM and IUD, have forced IUD to purchase iron ore from Brazil.

IUD's problems may have been of their own making. SCM, who have a surplus production capacity of iron ore had agreed to supply IUD with ore in 2005, but IUD pulled out of the deal having commenced negotiations to purchase 'Pivdennyi' ore enrichment plant from Ihor Kolomoyskyi's 'Privat' group. IUD had used the agreement with SCM to drive down the purchase price of 'Privat's plant. When the deal with Privat fell through, IUD were left high and dry, and Akhmetov's SCM had lost the order for about $50m of iron ore, for which Akhmetov could not forgive his rival, IUD.

But recently, Akhmetov and IUD's co-owner Serhiy Taruta flew together in the former's jet to to the recent world economic forum in Davos, and Akhmetov claimed they get on well. SCM's surplus iron ore production capacity will probably be 'mopped up' by their own planned increase in the production of steel.

The merger with Gazmetall and Usmanov may put IUD back in the driving seat. Perhaps this is why Vitaliy Hayduk, the other co-owner of IUD, has 'snuggled up' to the president and become secretary of the NSCD recently. He doesn't want anyone to mess up the deal.

Is the Gazmetall deal good for Ukraine if it comes to fruition? I say there is no harm in honest competition in a tough marketplace.

ps Minister of Justice Oleksandr Lavrynovych has stated that reports he was recently assaulted by Yanukovych are all lies. "The exact truth is, as I see it, is the journalist who put this into the newspaper must have had a [surgical] trepanning of the skull performed on him, and his brain replaced with a special device for spreading muck all over the country."

What a peculiar and vivid turn of phrase..Caused by after-effects of concussion? Medication? Possibly post-traumatic stress disorder?

And Ukrainian communist party leader Petro Symonenko is in hospital for treatment of a heart problem. There is no truth that he was beaten up by PM Yanukovych - Speedy recovery Pyotr Nikolayevich!