Majority owners of Ukraine’s Privat business group make last-minute $736 million bid for a prized Australian manganese and nickel miner
Billionaires Igor Kolomoisky and Gennady Bogolyubov, majority owners of Ukraine’s socalled Privat business group, raised eyebrows across the global mineral resources business when a company they control made a last-minute $736 million bid for a prized Australian manganese and nickel miner.
In bidding for Consolidated Minerals, the camera-shy owners of Privat entered into the arena of leading mineral resource companies and pushed forward with their quiet but aggressive expansion plans. Should the cash-flushed Privat group succeed with the acquisition, it will establish itself as a giant, and possibly a leader on the world ferroalloy market, analysts said.
Privat’s surprising bid through an offshore vehicle called Palmary Enterprises was revealed in an Aug. 31 article in the Financial Times as an 11th-hour takeover bid that trumped rival takeover offers pitched by Territory Resources and Pallinghurst Resources.
Palmary already holds a 14 percent stake in Consolidated Minerals, according to the FT article, which cited Bogolyubov as saying: “Palmary’s cash offer represents excellent value for Consolidated Minerals shareholders.”
On Sept. 3, the board of Consolidated Minerals advised shareholders to accept Privat’s offer. As of Sept. 5, shareholders were still contemplating the offers.
Before Privat’s arrival into the bidding process, competition between Pallinghurst and Territory Resources had already been fierce. Both companies are Australian mining companies. Consolidated Minerals churned out some 888,000 tons of manganese last year, equivalent to 10 percent of high-grade world production. Skyrocketing demand for this mineral has caused prices to surge this year.
Through ownership over vast ore mines and ferroalloy plants in Ukraine (as well as abroad), the Privat group already has a strong position on the ferroalloy market. Ukraine has one of the world’s largest reserves of ore used in the ferroalloy and steel production business.
Market analysts said Privat’s acquisition of Consolidated Minerals could yield them control of about 20 percent of the world ferroalloy market.
Belize-registered Palmary Enterprises is one of many offshore vehicles through which the Privat group controls billions of dollars of assets in Ukraine and abroad. In addition to owning Ukraine’s largest privately-owned bank, PrivatBank, Kolomoisky and Bogolyubov own a broad portfolio of assets in metallurgy, ferroalloy production, ore mining, telecoms, media and oil production.
Ukraine’s Kommersant business daily reported on Sept. 1 that Privat had teamed up with Territory Resources, an Australian ore producer, against Pallinghurst, a London-based natural resources investment fund.
According to the FT, Territory’s bid is backed by commodity traders Noble Group and DECOmetal and investment bank Lehman Brothers.
In addition to having blocking to minority interests in three ferroalloy plants in Ukraine, Privat reportedly has ownership interests in US-based Highlanders Alloys, Russia’s Alapayevskiy metallurgical factory, Romania’s Tulcha factory, the Zestafonskiy ferroalloy factory in Georgia and this Caucasus country’s largest producer of manganese, Chiaturmarganets.
Market analysts said Privat’s interest in Consolidated Minerals lies in its ability to supply manganese to its American ferroalloy plant, Highlanders Alloys.
The gold rush
Like Ukraine’s other leading financial industrial groups, Privat has in recent years engaged in an aggressive expansion strategy to acquire assets outside Ukrainian turf after having snapped up the most prized enterprises on home turf years earlier. During the last several years, PrivatBank has acquired Paritate Banka in Latvia, a Moscow bank, Moskomprivatbank, and 75 percent of Taobank in Georgia.
Last week, it was announced that Kolomoisky paid $110 million for a 3 percent stake in Central European Media Enterprises (CME), the media empire of Ronald S. Lauder, heir to the Estee Lauder fortune. CME owns interests in many television channels in Central Europe, including one of Ukraine’s top two channels, 1+1.
System Capital Management, the holding for Ukraine’s richest tycoon, Rinat Akhmetov, has recently acquired Italy’s Ferriera Valsider steel factory, which produces metal products for the automobile and machine-building industries. The diversified holding is seeking out other acquisitions outside Ukraine.
Industrial Union of Donbass (ISD Group), controlled by Serhiy Taruta and Vitaly Haiduk, acquired a 25 percent interest in a relatively small US steel this year. Years earlier, the group acquired steel mills in Poland and Hungary and is currently building a new facility in Russia.
