Page 117 - IFR Opportunities in Russian capital markets

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ifrintelligence reports/Opportunities in: Russian Capital Markets
Table 7.1: Russian acquisitions of foreign steel assets, 2003 – 06 (US$)
Deal
Acquisition of Rouge Steel (SNA) by severstal in 2003
Acquisition attempt of Stelco by Severstal in 2004. Not successful
Acquisition of Vitkovice Steel by Evraz in 2005
Buyout of Lucchini by Severstal from Mordashev in Q306
Merger of Severstal and Arcelor. 2nd offer in 2Q06. Not successful
Establishment of JV between NLMK and Duferco in 4Q06
Bid for Oregon Steel by Evraz in 4Q06
Source: Company data, TRUST estimates
Aluminium
Amount(US$) Comparativevaluation
Targetdescription
Rouge comprises all stages of steel manufacturing except for coke production. Steel output 2.5 mtpa Comprises all stages of steel production and includes mining assests.
Output 4.7 mtpa
Steel production from purchased pig iron and rolling it out into thick sheet. Output 0.87 mtpa
4 mtpa of longs and speciality steels. No mining assets
In order to obtain approval from Arcelor board, Mordashev valued Severstal at ridiculous US$10 per share 4.5 mtpa of rolled products with 2.1 mtpa of own slab production
1.5 mtpa of flats, pipes and rails with 0.8 mtpa of own slab production. Projected output growth
Impactonacquirersvalue
Positive
Negative
Positive
Slightly negative to neutral
Negative
Neutral, not consilidated
Negative in S.T., but may be positive in L.T.
285m
900m
240m
51% for 550m
–
50% for 800m
2.3bn
Severstal: EV/EBITDA (04) =4 Rouge:
EV/EBITDA (04) =3 Severstal: EV/EBITDA (05)=4 Stelco:
EV/EBITDA (05)=8 Evraz:
EV/EBITDA (05) =3 Vitkovice: EV/EBITDA (05) =2.5 Severstal: EV/EBITDA (07E) =4 Lucchini: EV/EBITDA (07E) =4 Severstal: EV/EBITDA (07E) =3 Arcelor:
EV/EBITDA (07E) =6 NLMK:
EV/EBITDA (07) =4 JV:
EV/EBITDA (07) =3 Evraz:
EV/EBITDA (06) =5 JV:
EV/EBITDA (06) =7
Only two aluminium companies emerged from what has been called the ‘metal wars’ – Russian Aluminium and SUAL. These two merged at the end of March with Swiss company Glencore's aluminium assets, to become Russia's first true multinational and the biggest aluminium producer in the world, with assets in over a dozen countries.
Telecoms
The state led a reorganisation of the fixed line telecoms sector at the start of the decade, which saw the 88 regional telecoms providers merged into seven super-regional companies. A massive reorganisation, this process barely got a mention in the international press and went amazingly smoothly. Since then, the long distance sector has been reformed and thrown open to competition and the first players are already taking their places.
Banks
There have been relatively few bank acquisitions or mergers so far, given the sector is badly over- banked and ripe for consolidation. Part of the reason is mergers in the banking sector need special permission from the CBR, which has been promising to simplify the rules for years but has yet to act. The first significant acquisition was Rosbank's US$200m take over of 1st OVK in 2004, the rump of the failed SBS Agro Bank, which made Rosbank the biggest commercial retail bank in Russia.
Utilities
The power sector set out on a similar restructuring to the telecoms sector in 2006, which is being driven by the state. The main thrust of the reform is to break up the regional ‘energos’, which control both the production and transmission of power, into their respective parts. Some 300 companies are being created in all, from which about 50 power companies are expected to emerge over the next few years. Foreign utility companies are expected to play a significant role in this process.
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