Glencore International Plc (GLEN), the largest publicly traded commodities supplier, is studying an acquisition of ferroalloy assets held by Russia’s OAO Mechel (MTLR), according to three people with knowledge of the deliberations.
The two parties are yet to reach an agreement, the people said, asking not to be identified because the information isn’t public. Glencore is mainly interested in the company’s assets in Kazakhstan rather than in Russia, while Mechel is seeking to divest the entire business, according to the people, who also cited Eurasian Natural Resources Corp. (ENRC) as a possible bidder.
Mechel, Russia’s largest producer of steelmaking coal, is seeking to sell assets at home, in Kazakhstan and in eastern Europe to cut $9.3 billion of net debt after a drop in commodity prices eroded profit. A deal would enable Baar, Switzerland- based Glencore to further its ferroalloys expansion after buying Vale SA (VALE3)’s European manganese-ferroalloys unit last year. ENRC already produces ferroalloys in Kazakhstan.
Mechel’s division may be valued at as much as $550 million, and the Kazakh assets at about $250 million to $300 million, George Buzhenitsa, an analyst at Deutsche Bank AG, said by phone from Moscow. OJSC Chelyabinsk Electrometallurgical Plant may also show interest, he said. Ferroalloys are alloys of iron used to make steel.
Mechel shares pared a 2.3 percent decline to trade down 0.6 percent at 162.20 rubles as of 6:34 p.m in Moscow. The company has lost 46 percent of its value during the past 12 months on debts and falling profit.
Mechel’s press service declined to comment. Spokesmen for Glencore and ENRC also declined to comment. Calls to Chelyabinsk Electrometallurgical Plant weren’t returned after normal business hours.
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