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. Last Updated: 07/27/2016

Indebted Maxi Group Goes To NLMK in $600M Deal

Novolipetsk Steel agreed Thursday to pay $600 million for control of indebted steelmaker Maxi Group, giving it increased access to the country's fast-growing market for construction steel.

Novolipetsk, or NLMK, the country's fourth-largest steelmaker by volume, said in a statement that it would pay two installments of $300 million to acquire 50 percent plus one share from Maxi Group founder Nikolai Maximov.

The deal allows Novolipetsk, owned by billionaire Vladimir Lisin, to share in Maxi Group's ambitious investment program and to keep pace with rival Severstal, which is building three mini-mills to serve the country's construction market.

"For a company that was technically in default, the price is a little bit high. But if you look at it from a strategic point of view, it's a good asset," said Olga Okuneva, a metals analyst with Deutsche UFG.

"It allows Novolipetsk to do the same as Severstal, but at a faster rate and at a larger quantity," she said.

Steel demand is rising in tandem with a domestic economy set to grow 7.4 percent this year and a further 6.6 percent in 2008.

Maxi Group, based in Yekaterinburg, plans to increase steel capacity to 5.9 million tons by 2012 from 2.4 million now at a cost Novolipetsk estimates at $3.7 billion.

But Maximov, who will retain ownership of the remainder of the company, wrote an open letter to President Vladimir Putin in which he said subsidiaries could not refinance debts because of the global liquidity crisis that began in the U.S. mortgage market.

Maxi Group has total estimated debts of $1.8 billion and had earlier held talks with billionaire Alisher Usmanov, owner of steelmaker and iron-ore miner Metalloinvest, about a takeover.

Novolipetsk said it would pay its first installment after the controlling stake in Maxi Group had been transferred and the second after due diligence.