UPDATE 1-Mechel to buy U.S. coal rival for $436 mln, plus shares
Wed Apr 22, 2009 1:24pm EDT
reuters.com
* Mechel to pay $436 mln plus 83.3 mln preferred shares
* Deal also includes $132 mln of debt, 5-yr targets
* Analyst values deal at $1.1 bln, excluding debt
* Mechel could list remaining preferred shares
(Adds details, analyst comment)
By Alfred Kueppers
MOSCOW, April 22 (Reuters) - Russian miner Mechel (MTL.N) has agreed to acquire U.S. rival Bluestone Coal Corp's coking coal assets for $436 million and 83.3 million preferred shares from the Justice family to expand its global market presence.
Mechel, Russia's largest coking coal miner, said on Wednesday it will also assume $132 million in Bluestone debt and that the purchase is expected to contribute to Mechel's earnings this year.
"We expect to have up to an estimated 725 million tonnes of coal reserves and resources in the U.S. and a more diversified asset base, including a strong foothold in North America and enhanced European, American and Asian sales channels," Mechel Chief Executive Igor Zyuzin said in a statement.
Mechel placed 138.8 million preferred shares this month in order to prepare for the purchase, and the framework of the agreement had already been widely reported in the Russian press. [ID:nL3123978]
The preferred shares Mechel still holds could be sold via a public offering "as soon as market conditions are favourable", the company said.
During a conference call, Mechel executives said they expect the deal to close in May. They did not comment on what sort of dividend payment might accompany the preferred shares.
The transaction also includes a clause under which Mechel must make additional payments to the Justice family in five years if the value of additional coal reserves, preferred shares and dividends falls below a target value now set at $1.6 billion.
Additional payments could follow if Mechel discovers more coal reserves in Bluestone's mines.
Uralsib analyst Michael Kavanagh values the purchase at $1.1 billion, excluding debt.
"The deal at this stage looks expensive," he said, adding the complex nature of the future payment agreement makes it difficult to value.
Zyuzin also said he hopes Bluestone reaches an annual production level of more than 7 million tonnes of coal.
"It is quite a good acquisition, taking into account the high quality of their coal, and Mechel's plans to increase Bluestone's production, as well as the fact that they have already sold almost all of 2009 production," Renaissance Capital analyst Boris Krasnojenov said.
The company's shares (MTLR.MM) closed up 4.3 percent on Russia's MICEX exchange, outperforming the exchange's metals and mining index .MCXMM, which was up 2.7 percent.
Mechel's New York-traded stock was up 2.5 percent by 1710 GMT. (Additional reporting by Polina Devitt; Editing by Andrew Macdonald) |
