Russias Mechel to buy Oriel Resources

Russias Mechel to buy Oriel Resources

Russian steel maker Mechel said on Wednesday it has agreed to pay $1.5 billion (750 million pounds) in cash to acquire ferro-chrome producer Oriel Resources as it expands its ferro-alloy business.

Mechel, Russia’s largest coking coal producer, said it would pay 219.86 U.S. cents per share in Oriel, a Britain-based company that operates a ferro-chrome smelter in Russia and is developing chromite and nickel mines in Kazakhstan.

The acquisition price is equivalent to 109.97 pence per share based on Tuesday’s exchange rate — a 13.7 percent premium on Oriel’s closing price on February 29, the day before Mechel said it was considering an offer.

“The acquisition of Oriel will enable Mechel to increase its competitiveness by expanding the existing ferro-alloy business, entering new markets and operating new production facilities,” Mechel Chief Executive Igor Zyuzin said in a statement.

New York-listed Mechel has a market capitalisation of $16.3 billion. Zyuzin holds the largest financial interest in the company.

As well as being Russia’s largest producer of stainless steel, the primary end use for chrome products, Mechel produces nickel and last year entered the ferro-alloy market with its purchase of ferro-silicon producer Bratsk Ferro-Alloy Plant.

Oriel Resources , listed in London and Toronto, last year launched production of ferro-chrome, an alloy used in steel making, at a new smelter in Tikhvin, 200 km (125 miles) east of St Petersburg.

Oriel imports chromite ore for the smelter but plans to launch its own mine, Voskhod, in Kazakhstan in the third quarter of this year. It also owns a nickel project, Shevchenko, in the Central Asian republic.

“In the four years since Oriel’s foundation, it has managed to build a valuable portfolio of significant ferro-alloy assets,” Oriel Executive Chairman Sergei Kurzin said.

“Nevertheless, we believe that the offer from Mechel provides an attractive opportunity for Oriel shareholders to realise their investment,” he said.

Oriel is owned by several businessmen and institutions. Those with an interest in the firm include Russian multi-millionaire Alexander Nesis.

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