A Russian steel tycoon teamed with London-based partners to sign a Jan 21 agreement to purchase ISTIL, a Ukraine-based metallurgical holding founded by a Pakistani investor.
The acquisition, worth more than $500 million, marks the continued advance of Russian steel groups into Ukraine, one of the world’s top ten steel producing and exporting countries.
The sale also follows a flurry of consolidation within the world steel sector, with much of the recent action occurring in Russia and Ukraine.
Vadim Varshavsky, principle owner of Russia’s Estar steel group, partnered with London-based international trader Stemcor to acquire ISTIL through Berycan, a Cyprus-based company.
According to a statement issued by Varshavsky’s Mirinvest company, he and Stemcor acquired 100 percent of ISTIL Group Holdings, giving them control of the group’s mini steel mill in Donetsk, a US mill, and trading companies across the globe.
The price paid for ISTIL, founded and controlled by Pakistani native Mohammad Zahoor, was not revealed but experts estimated ISTIL to be worth between $500 and $700 million.
Varshavsky’s partner, Stemcor, provides marketing, finance and logistics services to the steel industry, the company said. Founded in 1951, the company had $5 billion in sales last year and nearly 1,000 employees worldwide.
The agreement was signed days after Estar officials denied news reports that their company was in talks to purchase ISTIL.
Neither side explained why Varshavsky completed the acquisition through a company separate from Estar.
ISTIL’s Ukraine steel mill churns out up to 1 million tons of steel annually, a small fraction of Ukraine’s overall steel production. Analysts said the acquisition lifts Varshavsky from among the lesser-known steel players in Russia, giving him a presence in Ukraine, the US, and worldwide trading offices.
In recent years, larger Ukrainian steel groups consolidated control on Ukraine’s major raw material steel companies. ISTIL struggled recently to secure stable supplies of scrap metal and other raw materials, said Stepan Selyverstov, an analyst at the Prometal Internet steel portal.
The deal follows other acquisitions made in Ukraine within the past years by Russian steel companies. Russia’s Rusal group currently controls Ukraine’s Zaporizhya Aluminum and Mykolayiv Alumina plants. Smart-Group, represented by tycoon Vadim Novinsky, last year merged into the Metinvest steel holding controlled by Ukraine’s richest billionaire, Rinat Akhmetov.
