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. Last Updated: 07/27/2016

2 Investors Fight for Urals Steel Plant Stake

Two investors who lost a bid last year to acquire a blocking stake in the world's largest steel factory renewed their vows Wednesday to claim the shares, but analysts said they were fighting a losing battle.

Lawyer Alexander Dobrovinsky, who together with investor Mikhail Nekrich attempted last year to acquire a 30 percent stake in the Magnitogorsk Steel Plant, slammed a Chelyabinsk court ruling that annulled the sale to them, saying they had appealed to the Prosecutor General's Office over the way local prosecutors handled the case.

The court returned the shares to owner Magnitogorsk Steel, a company set up by the plant to hold the shares.

Nekrich and Dobrovinsky had originally secured a deal to buy the stake last year and paid $6 million of the offered $60 million before the agreement was called off by the court.

The pair's chances of reclaiming the shares are minimal, analysts said.

Even if the Prosecutor General's Office acts on the appeals, it is not going to follow through on the case because it is "not in the interests of the state" to allow such a significant stake in a major company to be sold to outsiders, said Oleg Timchenko, a metals analyst with United Financial Group.

"I can see no motives [for the Prosecutor General's Office] to bring the case to completion," he said.

"[Rashit] Sharipov was acting beyond his power and the buyers should have known this," said Eric Wigerts, metals analyst with Brunswick Warburg, referring to the key figure behind the sale.

The feud started early last year when Sharipov, then director of Magnitogorsk Steel, sold a 30 percent stake to several proxy companies, which in turn intended to sell to Dobrovinsky and Nekrich. Dobrovinsky has said he was acting on behalf of a large international investor.

At the time, Sharipov said he was selling the shares to prevent them from being used as collateral for part of a $1.5 billion loan from the European Bank for Reconstruction and Development. Sharipov said the shares would be lost because the loan could not be repaid.

The plant management dismissed Sharipov shortly thereafter, accusing him of not working in the company's best interests.

Sharipov had managed to complete the sale of the shares to the proxy companies before he was fired last February. A local court has issued a warrant for his arrest on charges of stealing the shares, and the former director is currently at large.

Despite the dispute over the shares, the EBRD disbursed two $10 million tranches of its loan in late 1998 and is currently considering another installment. A bank spokesman said Wednesday that the disbursement of the loan was going according to the initial plan.