Russian mining company
) has entered into an agreement with businessman Vadim Varshavsky
to sell its Donetsk Electrometallurgical Plant AO for €2,000
Mechel will divest 100% shares of Daveze Limited, which owns
100% shares of Donetsk Electrometallurgical Plant. Vadim will
also have to repay Donetsk's debt of $81 million to Mechel. Vadim
will soon take over the operational management for the Donetsk
plant. The agreement is expected to close in late 2013.
The divestiture of the plant will help Mechel in the present
macroeconomic situation, as there is no expectation of
significant improvements in the market where the plant operates
over the next few years. The plant halted its operations in Nov
2012 and turned into an unprofitable business owing to the high
The Donetsk plant accumulated a net loss of $16 million (on US
GAAP basis) in the first quarter of 2013 with $50 million loss in
2012. Thus, the divestiture will enable Mechel to significantly
improve its operational cash flow and prioritize its profitable
business - mining and high value-added steel products.
Earlier this month, Mechel entered into another agreement to
sell its ferroalloys assets to Turkey-based ferroalloys company
Yildirim Group for $425 million.
Mechel will dispose Voskhod Mining Plant in Khromtau,
Kazakhstan and Tikhvin Ferroalloy Plant in Tikhvin, Leningrad
Region, Russia. 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.
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.
Mechel retains a Zacks Rank #4 (Sell).
Other companies in the steel industry with favorable Zacks
Nippon Steel & Sumitomo Metal Corp.
Kobe Steel Ltd.
). While Nippon Steel holds a Zacks Rank #1 (Strong Buy), both
Kobe Steel and Ternium retain a Zacks Rank #2 (Buy).
KOBE STEEL-ADR (KBSTY): Get Free Report
MECHEL OAO ADS (MTL): Free Stock Analysis
NIPPON STEEL CP (NSSMY): Get Free Report
TERNIUM SA-ADR (TX): Free Stock Analysis
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