Mechel, Yildirim Seal Asset Deal


Russian miner Mechel OAO (MTL) declared closing of the deal for disposing some ferroalloys assets to Turkey-based ferroalloys company Yildirim Group for $425 million.

Mechel sold the Voskhod Mining Plant in Khromtau, Kazakhstan and Tikhvin Ferroalloy Plant in Tikhvin, Leningrad Region, Russia. The Tikhvin Plant produces up to 120,000 tons of high-carbon ferrochrome per annum. High-carbon ferrochrome is used to manufacture stainless steel. The Voskhod Plant comprises a modern chrome ore mine and a beneficiation plant that produces chrome ore concentrate.
Yildirim Group paid in full at the closure of the deal. Mechel will be utilizing the proceeds to deleverage and finance its priority development projects. The divestiture of the assets is a strategic move by Mechel, in sync with the ongoing assets restructuring program that was approved by its board earlier.
In 2013, Mechel has made significant progress in selling off its non-core assets as planned under the restructuring program. It completed the divestiture of 9 enterprises out of the 14 segregated for sale. The remaining non-core enterprises are expected to be sold off in 2014.
Societe Generale Corporate and Investment Bank, ING Bank and Dechert LLP were advisors to Mechel on this transaction. Erdem & Erdem Law Office in Istanbul, Turkey and Norton Rose Fulbright (Central Europe) LLP were advisors to Yildirim Group on this transaction.
With this acquisition, Yildirim Group’s chrome ore production capacity in Turkey and Kazakhstan has reached 2.5 million tons per annum. Additionally, its production capacity for high-quality high carbon ferrochrome in Turkey, Sweden and Russia has reached 520,000-tons.
Yildirim Group is the owner of Eti Krom Inc. in Turkey and Vargon Alloys AB in Sweden. The Group is among the prominent global players in high-carbon, high-quality ferrochrome production.
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 cost-cutting measures.
Mechel currently retains a Zacks Rank #3 (Hold).
Some better-ranked stocks in the steel industry include Companhia Siderurgica Nacional (SID), AK Steel Holding Corp. (AKS) and United States Steel Corp. (X). While Companhia Siderurgica holds a Zacks Rank #1 (Strong Buy), both AK Steel and United States Steel carry a Zacks Rank #2 (Buy).
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