Evraz Could Up Delong Stake to 75%, Says Other China Acquisitions Possible

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2008

Russia's Evraz Group could increase its stake in Delong Holdings to 75% as the result of an offer if its bid to acquire a controlling 51% stake in the Chinese steel trader and producer is successful, Evraz co-owner Alexander Frolov said during a conference-call. Frolov said Evraz might consider other steel and coal acquisitions in China if the Delong deal comes off. "There are some fairly good opportunities for further growth in the Chinese market, but it's too soon talk about further plans to do with them. We'll have to wait until September," Frolov said.
Evraz said in a financial statement for the first half of 2008 that it expected to obtain the necessary regulatory approvals to buy Delong Holdings in September. Best Decade, the core shareholder in Delong Holdings, recently agreed to extend the deadline for Evraz to close its takeover of Delong until February 18, 2009 because Evraz had not yet obtained clearance from the Chinese regulatory authorities to buy the controlling stake.
Evraz signed a deal in February to buy 51% of Delong Holdings for US$762 million and said it could in time increase that stake to 100% in what will be the Russian steel major's first acquisition in the Asia-Pacific region.
Evraz on February 25 completed the initial purchase of 10.01% of Delong Holdings (53,557,498 of its issued shares) at S$3.9459 per share. This reduced Best Decade's stake in Delong from 77.08% to 67.07%.
Evraz has a call option to acquire an additional 32.08% of Delong at the same price, conditional upon the satisfaction of certain terms. The call option was exercisable between the date of the completion of the initial sale and ending after the date following six months immediately after February 18, 2008.
In addition, the beneficial shareholders of Best Decade have signed an undertaking to sell approximately 8.97% of the issued share capital of Delong to Evraz at the offer price when certain restrictions in place due to existing financing arrangements are released.
Following completion of these transactions, Evraz will control approximately 51.05% of the issued share capital of Delong. Best Decade has an interest in approximately 77.08% of the issued share capital of Delong and will retain an interest of approximately 26.03% following this transaction.
In accordance with the Singapore Code on Takeovers and Mergers, Evraz will make a mandatory cash offer for the remaining Delong shares at the offer price, upon the exercise of the call option or the put option. The maximum consideration payable by Evraz will be approximately US$1.494 billion, assuming full acceptance of the mandatory offer, and the exercise of all outstanding warrants.
Frolov told the conference-call on August 29 that Evraz was not expecting to acquire more assets in North America for the time being. "We'll be spending the next six to 12 months focusing on the integration of the assets we have acquired and achieving synergies," Frolov said. He said coal and iron ore assets in North America were not of interest to Evraz because the company's steel making assets there do not use this sort of raw material.

Source: Interfax