As of June 9, it remained unclear whether the winning bid in what promises to be Ukraine's most controversial privatization tender would be announced on June 14, as originally planned.
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Six bidders submitted bids for a 93 percent share in Kryvorizhstal, Ukraine’s largest steel producer, by the June 7 deadline. Late on June 9, a day after a court threw out a lawsuit that temporarily halted the sale, the State Property Fund revealed the identity of the bidders. Meanwhile, oppositionist political groups promise to push forward with attempts to stall the sale.
As expected, two of the bids are backed by two of the world’s largest steel producers.
They include a joint bid by Russia’s Severstal and Luxembourg registered Arcelor, the world’s largest steel producer. The group wasted little time announcing that they offered $1.2 billion for Kryvorizhstal, significantly more than the starting price of about $700 million.
Another is a joint bid by LNM Group, the world’s second-largest steel maker, and United States Steel Corporation, ranked 13 in production. The two companies bid through a consortium called ISPAT Vuhilia (ISPAT Coal).
Yevrazholding, Russia’s largest steel holding, also bid, through one of the steel mills it owns.
All three placed bids despite the fact that they do not meet a controversial tender condition that requires bidders to have produced more than 1 million tons of coke in Ukraine every year for the past three years.
All three bidding groups had earlier urged Ukrainian officials to drop the condition, which favors bids by local steel holdings, in particular a consortium backed by a relative of Ukrainian President Leonid Kuchma.
Companies affiliated with Kuchma’s son-in-law Viktor Pinchuk, a parliament deputy, and Donetsk based tycoon Rinat Akhmetov, established a consortium to bid for Kryvorizhstal called Investment-Metallurgy Union. The consortium is one of the bidders announced by the SPF.
Another consortium, backed by Donbas Industrial Union, called Industrialna Grupa, also bid.
A mysterious firm called Partner Ltd. also made a bid. Partner is registered in the village of Chomonin, near Mukachevo, Zakarpattya oblast. The Mukachevo directory enquiries service told the Post that the building where the company is registered does not have a telephone.
India’s Tata Steel, which earlier this year announced its interest in buying Kryvorizhstal, did not place a bid.
Sour sale
Oppositionist political forces in Ukraine have rushed to criticize the sale conditions, alleging they were rigged in favor of business interests close to Kuchma and calling for privatization of strategic enterprises to be halted until after the elections.
Several attempts to pass a law in parliament, intended to halt the sale, fell short. A lawsuit filed by oppositionist Parliament Deputy Valentyna Semeniuk halted the tender for five hours on June 8, until Kyiv’s Pechersk District Court rejected that complaint later the same day.
Semeniuk promised to file other lawsuits, but as of June 9, no such lawsuits or barriers to the sale had been announced, leaving the SPF free to push ahead with the sale, results of which are scheduled to be announced June 14.
The SPF maintains that the sale conditions are fair and says that the sale will move forward as planned.
“From what we know, there are for now no other lawsuits,” SPF spokesperson Nina Yavorska said late on June 9. “The bids submitted are currently being reviewed,” she added.
Kuchma tried to distance himself from the steel tender scandal on June 9, telling journalists the government, led by Prime Minister Viktor Yanukovych, – not the president – was responsible for the sale. However, Kuchma simultaneously expressed his view that the sale should go through as planned.
“It is my personal opinion that the sale should occur,” he said. “We have seen time and time again, that when a [private] owner arrives at a factory, the situation [at the factory] improves dramatically,” Kuchma said.
A lack of transparency in the Ukrainian steel industry has in the past kept foreign steel out of the country, which ranks 7th in global steel production.
If the tender conditions stand, analysts said that foreign steel interests could qualify for the tender by partnering up with one of several Ukrainian steel groups that meet the coke condition.
However, time and other factors prevented them from establishing such partnerships.
LNM Group spokesperson Paul Weigh told the Post on May 25 that his company would not bid in partnership with a Ukrainian group that fulfills the coke production requirements. Rather, LNM Group and U.S. Steel hope that Ukraine will drop the tender requirement, which they view as discriminating against potential foreign investors.
The coke-production condition also elicited protest from Severstal and Arcelor, which threatened to sue Ukraine for imposing the condition.
