LN Mittal in race for Bulgarian steel co

MUMBAI: Lakshmi Mittal, the world’s largest steel maker and the richest Indian, has locked horns with Ukrainian tycoon Konstantin Zhevago in the final round of bidding for acquisition of the Bulgarian steel firm Kremikovtzi. Lakshmi Mittal’s ArcelorMittal and Mr Zhevago’s Vorskla Steel Bulgaria have submitted proposals for acquiring Kremikovtzi, which in turn has constituted a committee to choose one of the two. A decision to this effect is likely to be taken next week. Sources said representatives of Mr Zhevago, who is also a prominent bondholder of Kremikovtzi, last week met Kremikovtzi and expressed willingness to acquire it on the same day. This development has given a new twist to the takeover of Kremikovtzi which, otherwise, appeared to be only Mr Mittal’s acquisition target. Kremikovtzi’s advisor Merrill Lynch scaled down the bidders from 20 to seven nearly a month ago. Subsequently, all others, barring these two, left the fray. Merrill Lynch missed its target of announcing the name of the winning bidder nearly a fortnight ago mainly due to fresh proposals of Vorskla. According to sources, the aggressive ArcelorMittal still has the capability to tilt the scales in its favour. On the other hand, the trade unions of the Balkan country’s biggest steelmaker are supportive of the offer of Mr Zhevago. It’s learnt that Mr Zhevago is interested in joint management control of Kremikovtzi and has offered to pay $90 million in working capital. ArcelorMittal, on the other hand, wanted full acquisition and promised to chip in nearly $50 million for immediate due payments and salaries, and another $150 million for working capital requirement. It also offered to invest $500 million in the next five years and up to $1.2 billion in 10 years. There are other conditions attached to the acquisition, too. These include investments of $20 million on ecological issues this year. Also, the new owner is now permitted to take fresh debts from the providers of railways, electricity and gas. Kremikovtzi has a production capacity of 2.2 million tonnes. Last year, it produced 1.4 million tonnes of steel. Its liability stands at around $1.35 billion. The debt burden and spiralling raw material costs have put pressure on the company’s cash flow. Recently, it failed to pay its 8,000 workers. Pramod Mittal’s Global Steel Holdings, which acquired a 71% stake in Kremikovtzi three years ago, has put it on the block as it failed to bring in funds for working capital and environmental upgrades. The Bulgarian government has one-fourth ownership of Kremikovtzi. The company accounts for 10% of the country’s exports. The Global Steel Holdings’ spokesperson was not available for comment. If ArcelorMittal manages to bag Kremikovtzi, it will be the first transaction between the Mittal brothers after the elder brother left the country to carve out his own empire in mid-90s. Also, ArcelorMittal will have synergy in running the Bulgarian company as it has a vast iron ore mine in Krivhyrih in Ukraine from where it could transport ore. Kremikovtzi does not have its own captive ore reserves.