Russian steel firms are in acquisition-mode

Steel producer Novolipetsk Steel (NLMK) has made a strategic US-based acquisition, having signed an agreement to acquire US steel pipe and tube manufacturer John Maneely Company (JMC).

It is acquiring the company from a shareholder group including global private equity firm The Carlyle Group and the Zekelman family for US$3.53bn on a debt-free and cash-free basis. The transaction is subject to regulatory approval and due to close in the fourth quarter of 2008.

JMC is the largest independent tubular manufacturer in North America, and this acquisition fits in with NLMK’s strategy of portfolio diversification and downstream integration.

Vladimir Lisin, chairman of NLMK comments: “We are delighted to have secured an entry into the highly attractive US pipe and tube market and we are confident that the incorporation of JMC’s quality assets into the NLMK group will prove to be a highly beneficial development for JMC’s customers and employees.”

Metals and mining firm Severstal has also made an acquisition in the US, having acquired US firm Esmark Incorporated, a manufacturer and distributor of flat rolled and other steel products in early August. The acquisition has a total equity value of US$775mn, plus the assumption of debts and loans.

Under the terms of the merger, Severstal is to acquire all of Esmark’s businesses, including Wheeling Pittsburgh Steel Corporation, to be renamed Severstal Wheeling; Esmark Steel Services Group, to be renamed Northern Steel Group, and the remaining 50% ownership of the joint venture mountain state carbon, a blast furnace coking coal production facility in West Virginia.

The Severstal’s offer managed to beat off competition from India’s Essar Steel Holdings.
The acquisition of Esmark represents a step in Severstal’s North American growth strategy. “It solidifies Severstal’s position as one of the leading integrated steel companies in the fast consolidating North American market,” comments Gregory Mason, CEO of Severstal International and COO of Severstal.

Severstal Resources, the mining division of Severstal, has also made a recent acquisition taking control of Balazhal, a gold mine in East Kazakhstan. Mining operations had been suspended in 2006 due to financial difficulties, but Severstal plans to resume production by 2009.