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Mechel's Unit Buys Vanino Stake

Zacks Equity Research

Russian miner Mechel OAO (MTL) announced that its logistics subsidiary Mecheltrans OOO has acquired a 21.64% stake at Port Vanino for 4.57 billion rubles (around $152 million) from one of the port's minor shareholders, a subsidiary of the company En+.

According to the agreement signed between the two parties, Mecheltrans got hold of the port's shares, effective immediately. The payment for the share package is expected to be made within 145 days.

Mechel, in Jan 2013, acquired a controlling stake in Vanino Sea Trade Port OAO from the Russian government and foreign investors for roughly RUB15.5 billion ($512.5 million). The takeover was in sync with the company’s efforts to expand its export capacities in the Asia-Pacific.

Few days following the acquisition, Mechel announced the sale of a part of its 73.3% stake (55% of share capital) in Vanino Sea Trade Port OAO to investors. Following the sale, Mechel retained about 1.5% of the enterprise's common shares.

Port Vanino is one of Russia’s largest ports and is suitably located for Mechel to serve the Asia Pacific region. The port is also open for navigation throughout the year and is the largest transport hub in the Kahabarovsk Region.

According to Mechel, Port Vanino’s coal transhipment capacity can be increased to 7 million tons in 2013 without incurring any significant costs. This also saves Mechel from building its own storage terminal at Vanino for the next 3-5 years. By utilizing the capacities of the port, Mechel can increase its customer base.

Mechel currently retains a short-term Zacks Rank #4 (Sell).

Other companies in the steel industry with favorable Zacks Ranks are Gibraltar Industries Inc. (ROCK), POSCO (PKX) and ArcelorMittal South Africa (AMSIY). While POSCO holds a Zacks Rank #1 (Strong Buy), both Gibraltar and ArcelorMittal South Africa hold a Zacks Rank #2 (Buy).

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