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. Last Updated: 07/27/2016

Severstal Buys OMZ Subsidiary

In a bid to further expand the scope of its business beyond steel, Severstal has bought United Heavy Machinery's engineering subsidiary, the two companies said Wednesday.

Kaha Bendukidze's United Heavy Machinery, or OMZ, sold its Metallurgy Equipment and Technology Co. to Severstalmash for an undisclosed sum.

The deal gives Severstalmash, Severstal's machine-building group, 300 engineers who design industrial equipment used in the metals industry -- like the powerful machines that pour molds and roll metal, from their offices in Yekaterinburg.

"The company will essentially get an office building filled with designers and draft tables," OMZ spokesman Andrei Anufriyev said. "No industrial assets are being sold."

"I won't say how much it cost, but facilities like these aren't that expensive," Severstalmash general director Alexei Yevgeniyev said. "

A lot of them are in dire straits these days."

Both sides declined to disclose the price tag. The engineering arm posted sales of $30 million last year.

OMZ called the sale part of a drive to consolidate along other lines.

"This is one more step in the restructuring," OMZ executive director Sergei Lipsky said in a statement.

Andrei Kormilitsin, an analyst with Troika Dialog, said OMZ was trying to cut costs and refocus its efforts into building ships and manufacturing oil-drilling equipment and nuclear power plant components.

Severstalmash sales amounted to just over $100 million last year, which is dwarfed in comparison with what it sees as the total market potential. Through the acquisition, Severstalmash plans to move into the market for servicing heavy machinery plants, Yevgeniyev said.

"We hope to increase our turnover to $150 million in 2003 with the addition," he said.

To bolster its expertise, Severstalmash bought a minority stake in St. Peterburg's Kolpinsky metals research institute last week.