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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