The Ukrainian mining and steel producing company Metinvest Holding (Metinvest) has confirmed that it is in negotiations with domestic steelmaker Ilyich Iron and Steel Works of Mariupol (Ilyich) on possible cooperation and joining of efforts to overcome the implications of the global financial crisis.
"The parties are considering opportunities for cooperation and utilization of joint resources to ensure strengthening of positions of national producers in the global markets," reads Metinvest's statement.
As SteelOrbis reported earlier, on Tuesday, June 15, Ilyich CEO Vladimir Boyko revealed that Ilyich is in merger talks with Metinvest, stating he expects positive results after the company resolves the ongoing ownership dispute.
Meanwhile, Eugen Dubogryz, analyst from BG Capital, commented, "The pending merger is highly probable, in our view, as it fits with both companies' short- and long-term goals. Metinvest is looking to develop its steel wing, and likely views Ilyich as an attractive merger target after its recent failure to acquire Zaporizhstal. Ilyich, in turn, is struggling under the weight of working capital shortages and undersupplies of raw materials, both problems that can easily be resolved by vertically integrated and cash-rich Metinvest. We also believe the possible merger holds big benefits for Metinvest-owned Avdeyevka Coke and Chemicals Plant, whose coke production capacities are currently heavy underutilized (2.3 million mt in spare facilities, 42 percent of total annual potential). Avdeyevk has strong chances of boost coke output starting from 2011 by increasing deliveries to Ilyich."
Furthermore, analysts from Astrum Investment Management noted that the merger between Ilyich and Metinvest or even the acquisition of Ilyich by the latter is likely to happen in H2 2010-H1 2011. "If the merger proves successful, the new company should have a steel smelting capacity of about 16 million mt per year and become amongst the top 20 steelmakers globally," reads the Astrum Investment Management statement.