Mittal buys Ukraine steel mill for USD 4.7 billion
24 October 2005, KIEV - Mittal Steel on Monday bought a controlling stake in a giant Ukrainian steel mill, setting a new record high price for a privatisation in the former Soviet republic.
24 October 2005
KIEV - Mittal Steel on Monday bought a controlling stake in a giant Ukrainian steel mill, setting a new record high price for a privatisation in the former Soviet republic.
The Netherlands-headquartered consortium's winning bid for the Krivorizhstal steel works was equivalent to 4.74 billion dollars. Once the takeover is completed, Mittal will become by far the largest single foreign investor in Ukraine.
"This single sale is worth 20 per cent more than all of the income of all of the state privatisations, in all of Ukraine's history," said Ukrainian President Viktor Yuschenko, in press comments.
"This is proof that Ukraine can conduct a fair and open privatisation," he added.
Two Ukrainian industrial conglomerates - the French-Ukrainian Smart Group and the Donetsk-based Industrial Group - also participated in the bidding. It was the first time any Ukrainian state company had gone on the block on live television.
The German branch of Mittal Steel, Mittal Steel Germany GmbH, submitted the winning bid. Mittal will obtain a 93 per cent share in the mill.
Starting offers were equivalent to 2 billion dollars. The price increased to 3.4 billion dollars halfway through some forty minutes of energetic bidding.
The seriousness of Mittal's intention to acquire the plant was clear early on in the auction, with CEO Lakshim Mittal on hand at the bidding, and repeatedly taking the initiative to top counter-offers.
Industrial Group, an alliance between French Arcelor and Ukrainian industrial tycoon Rinat Akhmetov, fell out of the competition first.
The pure-Ukrainian Smart Group consortium lasted longer until defeated by Mittal's winning bid. Mittal is the world's largest steel company, followed by Arcelor.
Senior members of Yushchenko's administration, and even his recently-sacked former Prime Minister Julia Timoshenko, were present in a State Property Fund (SPF) auction room packed with media and dignitaries.
"We have proved Ukraine can be a place for honest business, and not tycoon insiders," a jubilant Timoshenko told reporters afterwards. "This sale gives Krivorizhstal back to the people."
Ukrainian Communist leader Petro Symonenko called the auction "a crime...theft of the jewel of Ukrainian metallurgy by capitalists".
Krivorizhstal with 7.1 million tons of annual production accounts for 20 per cent of Ukraine's steel output. Ukraine is the seventh- largest steel exporter in the world.
Yushchenko's reform government had made the sale of Krivorizhstal a flagship project for the administration's effort to increase foreign investment.
The Monday sale is however unlikely by itself to repair fully Ukraine's battered reputation as a place where privatisations are fixed in favour of government insiders, and frequently challenged in court by losing bidders.
The government's decision to go ahead with the auction came in the face of a parliament resolution earlier this month placing the sell- off on hold, pending a legislative review. It is unclear whether the Ukrainian executive branch may override parliament in such a case.
Another possible challenge to the Mittal acquisition could come from a still in progress suit over the failed sale of Krivorizhstal to a group of Ukrainian investors last year.
The Yushchenko administration earlier this year cancelled the 2004 transfer on grounds the previous government sold off the steel mill at an artificially low price.
Lower courts held up the government move, but the case is on appeal, with a decision expected in coming months.
Subject: German news