) extraordinary general shareholders meeting has approved the
issue of guarantee for performance of Mechel Group sellers'
obligations to the Turkey-based ferroalloys company Yildirim
Group, under the sale-purchase agreement.
Mechel, on Aug 1, entered into an agreement to sell its
ferroalloys assets to Yildirim Group for $425 million. The
issuance of the guarantee is a condition for the closure of the
deal. The deal is expected to close by the end of 2013.
The sale-purchase agreement states that Mechel will dispose
Voskhod Mining Plant in Khromtau, Kazakhstan, and Tikhvin
Ferroalloy Plant in Tikhvin, Leningrad Region, Russia to Yildirim
Group. The Tikhvin Plant produces up to 120,000 tons per annum of
high-carbon ferrochrome that is used to produce stainless steel.
The Voskhod Plant is a modern chrome ore mine that produces
chrome ore concentrate.
Under the sale-purchase agreement, Mechel Group's companies act
as formal sellers and an SPV within Yildirim Group acts as a
buyer. Mechel plans to utilize the proceeds from the deal to
deleverage and continue to finance its priority development
projects. The divestiture of the assets is a strategic move by
Mechel, in sync with the ongoing restructuring assets program
that was approved by its board earlier.
Yildirim Group will pay the total amount for the transaction to
Mechel immediately after the closure of the deal. However, the
deal's closure depends on all necessary approval required from
Kazakh and Russian regulatory authorities and from corporate
management agencies of both the companies.
Societe Generale Corporate and Investment Bank, ING Bank and
Dechert LLP are the advisors to Mechel for this transaction.
The acquisition will boost Yildirim Group's production
capacity to a world-class level of 2.5 million tons per annum.
Yildirim Group is the owner of production plants at Eti Krom in
Turkey and Vargon Alloys AB in Sweden. With the addition of
Mechel's ferroalloys assets, Yildirim Group will place itself
among the prominent players in high-carbon, high-quality
Mechel is a leading domestic steel and coal producer with a
strong position in key businesses, including production of
specialty steel and alloys. The company has the largest coal
reserve base in Russia and is mainly focusing on growth and
Mechel retains a Zacks Rank #4 (Sell).
Other companies in the steel industry with favorable Zacks
Companhia Siderurgica Nacional
Shiloh Industries Inc.
). While Companhia Siderurgica and Shiloh hold a Zacks Rank #1
(Strong Buy), Gerdau retains a Zacks Rank #2 (Buy).
GERDAU SA ADR (GGB): Free Stock Analysis
MECHEL OAO ADS (MTL): Free Stock Analysis
SHILOH INDS INC (SHLO): Get Free Report
CIA SIDERUR-ADR (SID): Free Stock Analysis
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