Evraz Plc (EVR), Russia’s largest steel producer by output, closed a deal to sell its Czech unit to a group of private investors to help cut debt amid foundering European steel demand.
Evraz, controlled by Chelsea soccer club owner Roman Abramovich and billionaires Alexander Abramov and Alexander Frolov, sold its Vitkovice Steel unit to a group of five investors for a gross consideration of $89 million and the assumption of $198 million of debt, it said today in a statement. That is close to the $285 million Evraz paid for the unit in 2005 after beating out rivals including Mittal Steel.
Evraz is cutting European operations after demand slumped, saying in April last year that it plans to sell the Vitkovice unit. European steel demand slumped more than 7 percent in 2012, rising 0.7 percent last year, according to a January report from Morgan Stanley. Excess capacity for some steel products in Europe is close to 30 percent to 45 percent, Pavel Tatyanin, Evraz’s international business chief, said in October.
“The deal’s terms are very good for Evraz and it will help the company to possibly cut the debt,” George Buzhenitsa, Deutsche Bank AG analyst said by phone from Moscow today.
As part of the deal, the buyers -- Martinley Holdings Ltd, Nabara Holdings Ltd, Vitect Services Ltd, Hayston Investments Ltd and Dawnaly Investments Ltd -- agreed to repay $128 million of Evraz’s intercompany debt, according to the statement. The $89 million consideration is adjustable for the actual level of the unit’s working capital, Evraz said.
The steelmaker will use some of the proceeds to repay its own debt, according to the statement.
Evraz’s 2013 net debt may reach $6.9 billion, according to the average estimate of 10 analysts surveyed by Bloomberg. The company’s shares have declined 32 percent this year on low commodity prices and after Russia’s incursion to Ukraine.
To contact the reporter on this story: Yuliya Fedorinova in Moscow at firstname.lastname@example.org