Jun 15 2004
LNM Group, the world’s second largest and most global steel producer, and United States Steel Corporation (“U. S. Steel”), the world’s 6th largest steel producer, today express their disappointment over the results of the tender for the privatisation of Kriyviy Rih Mining and Smelting Plant “Kryvorizhstal” (“Kryvorizhstal”) announcing The Investment and Metallurgical Union as the winner.
The LNM – U. S. Steel Consortium urges the Ukrainian President and the Prime Minister to investigate the tender process as it understands that the winning bid is UAH 4.26 billion, which is substantially lower than the LNM – U. S. Steel Consortium bid.
The LNM - U. S. Steel Consortium submitted a very strong bid, which totalled some UAH 14.31 billion (US$2.7 billion).
This comprised UAH 7.95 billion (US$ 1.501 billion) for the 93% equity plus an additional UAH 6.36 billion (US$1.2 billion) for the implementation of a capital expenditure programme. The LNM – U. S. Steel Consortium offer exceeds several times the announced winning bid of UAH 4.26 billion.
The bid also addressed environmental and social commitments. The LNM – U. S. Steel Consortium guaranteed all existing jobs and declared its commitment to maintaining and improving social harmony at the plant and fulfilled all the terms of the tender relating to this issue.
Other key elements of the LNM – U. S. Steel bid and proposed development plan comprise:
- Reaching steel production in excess of 11 million tonnes
- Providing access to global markets for Kryvorizhstal
- Increasing supply to the domestic market
- Ensuring EU compliance on environmental issues
- Building a strong flat products capability
- Commitment to purchase Ukrainian raw materials including iron ore & coke
LNM and U. S. Steel believe that their bid – together with their combined financial strength, industry experience and unrivalled track record in privatisations – offered a unique opportunity to both the Ukrainian economy and its steel industry. In addition, the financial offer reflects a true market value of the assets which is superior to any other offer published in relation to the Kryvorizhstal privatisation.
The consortium is disappointed that the State Property Fund chose to ignore this opportunity and believes that Ukraine has missed a real opportunity by effectively ruling out foreign bidders from the privatisation of Kryvorizhstal.
A successful privatisation should be based on economics and by limiting the privatisation in this way the Ukrainian economy is being deprived of a competitive tender which would provide substantial additional investment for the country’s development.
Notwithstanding the announcement by the State Property Fund that Kryvorizhstal will be privatised to The Investment and Metallurgical Union, LNM and U. S. Steel believe in the viability of the plant, with proper investment and management, and will continue to follow the process and be attentive to any opportunities that allow their consortium to be involved.
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