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. Last Updated: 07/27/2016

NLMK Steel Set to Increase U.S. Assets

bloombergVladimir Lisin
Novolipetsk Steel, or NLMK, and Switzerland-based Duferco trading group have formed a consortium with U.S. steel-services firm Esmark to buy the assets of U.S. steel producer Winner Steel, NLMK said Monday.

Pennsylvania-based Winner Steel is one of the largest independent galvanized-steel producers in the United States with a combined annual capacity of approximately 1.2 million tons. Production in 2006, however, was only around 600,000 tons.

The deal is expected to be completed in the second quarter of 2007, the statement said, although the company did not offer more specific details.

Winner Steel might be worth up to $500 million but analysts are doubtful the company can raise offers of that size.

"Significantly less" will be paid for the firm, said Sergei Donskoi, a metals and mining analyst at Troika Dialog. It is not a financially interesting asset for NLMK and it was only working at half capacity last year, but it fits into the company's plans to broaden their range and increase output, Donskoi said.

Winner Steel's proximity to the NLMK-Duferco joint venture's Farrell facility will be a logical component of the partnership's North American growth strategy, said Benedict Sciortino, director of the Duferco Group in a statement.

Donskoi added that the purchase of Winner Steel assets might be about making sure the company is able to sell what its produces in future.

The deal "will provide for an increase in value-added products and further expansion into the large North American market," NLMK president Alexei Lapshin said in a statement.

NLMK produces more than 9 million tons of crude steel annually. It is majority-owned by billionaire Vladimir Lisin, Russia's fifth-richest man, according to Finans magazine, with a fortune estimated at $13.9 billion.

NLMK agreed to form a $1.6 billion joint venture with Duferco in order to make and distribute the alloy in the United States and Europe. Novolipetsk paid $805 million for 50 percent of the venture. The venture first gave NLMK assets in the United States.

Apart from NLMK, two other Russian steel companies have assets in the United States. Alexei Mordashov's Severstal bought bankrupt Rouge Industries, a supplier to Ford Motors, in 2003 for $285.5 million. In January, Roman Abramovich's Evraz Group completed a $2.3 billion cash acquisition of steel producer Oregon Steel.