Mittal Steel Company N.V., already the world's largest global steel company with operations in 14 countries, agreed to acquire a 93.02-percent stake in the capital of Ukraine steelmaker KryvorizhStal. Under the terms of the share purchase agreement, Mittal Steel will acquire 3,590,038,755 shares of the share capital of KryvorizhStal for a total consideration of UAH 24.2 billion (approx. U.S. $4.79 billion). The transaction will be financed out of Mittal's own cash resources and credit lines. In addition to its existing liquidity lines and cash balances, Mittal Steel last week signed a $3 billion loan agreement with Citigroup with terms similar to its $3.2 billion revolving credit facility.
KryvorizhStal is the largest carbon steel long products producer in Ukraine and the region, with 2004 liquid steel production of 7.7 million tons and 2004 shipments of 6.7 million tons. It also produced 17.1 million tons of iron-ore. KryvorizhStal had 2004 sales of $1,897 million and net income of $378 million.
Mittal says the transaction marks another key milestone in its business in Eastern Europe, which is integral to its European and global strategy. KryvorizhStal is said to offer a low-cost production platform with a strategic location, at the heart of a strong growth market. KryvorizhStal operates a single integrated steel plant located within a large iron ore mining complex. Approximately 80 percent of total sales are exported through major ports only 400 km from the plant, benefiting from a rail transportation network. KryvorizhStal has modernized its facilities and received ISO 9001 Quality Accreditation.
"Strategically this is a key acquisition for Mittal Steel Company, as it provides us with a large size low-cost production platform in a core and fast growing market," said Mittal Chairman and CEO Lakshmi Mittal. "KryvorizhStal is a high quality steel and mining asset and we are confident that we can help the company expand further by providing our marketing, procurement and technological knowledge and expertise. KryvorizhStal is today a good quality asset. We are excited about the prospects of accelerating its growth.
"KryvorizhStal could over the years become our largest steel plant in the region and offers significant flexibility regarding the development of its product range. KryvorizhStal will add valuable mining reserves to the group. Overall, we expect to generate over $200 million of pre-tax synergies by the end of 2006."
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