Kryvorizhstal could fetch a record price at auction
Last week, Ukraine’s State Property Fund announced a tender to sell a 93.02% stake in Kryvorizhstal, Ukraine’s flagship steel mill, churning out six million tons of rolled metal, seven million tons of steel, and over 7.8 million tons of cast iron annually. The minimum opening bid will be UAH 3,806 million, a record price for Ukrainian privatization. The fixed assets of Kryvorizhstal have been appraised by an international consulting company Otsinka [Appraisal] based in Kyiv, which has been selected in a tender. Another 7% of the company’s shares will be reserved for company employees (1.1%), other individuals with preferential rights to buy such shares (0.88%), and Kryvorizhstal management (5%).
On May 5, the SPF invited potential investors to participate in the drafting of the tender terms, under which investors shall be obliged to pay the company’s outstanding debt on loans guaranteed by the government, introduce progressive technologies, upgrade manufacturing facilities, maintain current output, and preserve jobs for at least six months. The tender has been slated for thirty days later. There are also additional tender terms. Bids will be accepted from individual investors or associations of investors who are interested in preserving the share of Kryvorizhstal on the market of ferrous metals, which currently stands at 20%, and who meet the qualifying requirements. The later have been set forth in such a way as to involve in the tender not only the so-called industrial investors, namely metallurgists, suppliers of raw materials, and big consumers of metal products, but also companies or banks, which have controlled their operations for at least one year. The last condition is that offshore companies are not allowed to submit their bids.
Some high-profile bidders are readying to scale the Everest of Kryvy Rih, as SPF Chairman Mykhailo Chechetov dubbed the Kryvorizhstal giant, whose sale could generate over a billion hryvnias in budget receipts. Long before the tender was announced, Indian Tata Steel declared its readiness to channel nearly one billion dollars US into Kryvorizhstal. The question of whether the Indians intend to share the company with Ukrainian or other partners remains open. Meanwhile, Russia’s Severstal, which acts in partnership with Arcelor, will be represented by Citigroup, the world’s biggest bank. Moreover, the Russians have begun consultations with Ukrainian partners. Severstal also plans to involve in the tender its affiliate, Severstal North America, the fifth biggest steel mill in the US. “The participation of our American affiliate company is due to the fact that we are interested in possibilities to supply Kryvorizhstal metal to the US to be further processed at Severstal North America. At the same time, we look toward increasing the output of the Ukrainian company to ten million tons of steel annually,” Severstal Chairman of the Board of Directors Oleksiy Mordashov noted.
It is obvious that Kryvorizhstal will attract other moneyed investors looking for a place to park their billions. Yet the most likely successful bidder seems to be a Ukrainian Donetsk and Dnipropetrovsk-based investor, the newly created Metallurgic Investment Union. Moreover, there are signs that it has both economic and political motives to bid the highest price. It will be recalled that in a recent interview with The Day SPF Chairman Mykhailo Chechetov attached great importance to the recently created consortium.
