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Mechel (MTL) Announces Divestiture of Mechel Bluestone - Analyst Blog

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Russian miner Mechel OAO ( MTL ) announced that it has divested Mechel Bluestone, Inc. (Delaware, USA), including its mining operations, to a company owned by the Justice family. The deal includes a cash payment of $5 million and royalty payments on coal mined and sold in an amount of $3 per ton.

As per the deal, Mechel will also get a portion of any future sale of Mechel Bluestone and/or its assets (12.5% of the sale price if within five years of transaction close or 10% of the sale price following five years).

As a part of the deal, both the companies have agreed to end all claims against each other, including their unresolved dispute associated with the calculation of a contingent payment obligation arising out of the 2009 transaction, in which, Mechel acquired the Bluestone assets from Justice.

The company decided to sell Bluestone as a part of its strategy to dispose of its non-core and non-strategic assets. Mechel did not consider mining at Mechel Bluestone's mines and open pits to be profitable. Selling it will take off about $40 million of liabilities from the company's balance sheet and as well as enable it to avoid over $160 million worth of legal risks. Moreover, the sale will allow the company to repay its debt.

Mechel is a leading steel and coal producer with a strong position in key businesses, including the production of specialty steel and alloys.

Mechel currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the steel space include Kobe Steel Ltd. ( KBSTY ), ThyssenKrupp AG ( TYEKF ) and LB Foster Co. ( FSTR ). While Kobe Steel and ThyssenKrupp sport a Zacks Rank #1 (Strong Buy), LB Foster carries a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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