Fire sale at "Mechel": 4 plants for 50 Euros

The "Mechel" group yesterday surprised the entire market, through an announcement that it has sold the four plants it owned in Romania for the amount of ... 230 lei (about 52 Euros/70 dollars). According to the representatives of "Mechel", the Romanian assets have been acquired by "Invest Nikarom" SRL Bucharest, a company which deals in the sale of machinery and equipment.

• Who is "Invest Nikarom"?

Speculations concerning the "true" buyer of the Mechel plants in Romania did not take long to appear. Market sources said that the Russians of Mechel are only interested in liquidating their businesses in Romania, because they had some Italian investors some time ago express their intention to buy the assets of Mechel.

According to data from the Trade Registry, "Invest Nikarom" is a Romanian company which has a share capital of 100,000 lei.

The company has as shareholders Svetlana Chumakova and Victor Chumakov, both of them Russian citizens - the parents of Olga Chumakova, şeful the head of the branch of "Mechel" in Romania, according to sources close to the transaction.

Yesterday, Olga Chumakova refused to comment this deal.

In 2004, "Invest Nikarom" represented the Latvian holding "Aviabaltika" in Romania, a company controlled by Yuri Borisov, Russian businessman suspected of ties to the Russian intelligence services.

"Aviabaltika" owns Russian company Sparc, which repairs helicopters. In Romania, through Victor Chumakov, Sparc has equipped the helicopters of the Ministry of Internal Affairs.

Yuri Borisov received Lithuanian citizenship through the decree issued in April 2003 by the president in office at the time, Rolandas Paksas, Lithuanian media writes. the Constitutional Court in Lithuania decided that Paksas violated the constitution through this decision, which he made to reward Borisov for the support he gave him.

Yuri Borisov was the biggest donor for the electoral campaign of Rolandas Paksas for the presidential elections. The amount he offered was 416,000 US dollars.

Unofficially however, this figure exceeded 1 million dollars, according to the quoted sources. Rolandas Paksas was removed from office in 2004, following the vote of the Parliament.

• The man of Dan Voiculescu?

The local newspapers reported years ago that "Invest Nikarom" was designated as the winner of the project for the dismantling of unit no. 8 of the Turceni electric plant. At the time, the domestic press speculated that the representative of the domestic company is "a Lithuanian citizen - the agent of the companies of Dan Voiculescu, recommended by Minister in office at the time, Codruţ Şereş".

• Last year, Mechel was asking for 150 million dollars for its Romanian assets

The representatives of "Mechel" told us since back in autumn 2012 that the Group was conducting negotiations with a potential investor interested in buying its assets it has in Romania. They said that the company they were negotiating with intended to keep the integrity of the "Mechel" plants.

The "Mechel" metallurgic group announced, at the time, that it intended to sell off numerous assets across Europe, including the plants it owned in Romania, for which it wanted to earn 150 million dollars.

The unionists at the company told us that they expect to have their first meeting with the new owners of "Mechel" Romania next week and that they hope that the activity of the four plants to resume.

The sale of the four metallurgic plants of the "Mechel" Group - Ductil Steel Buzău, Mechel Câmpia Turzii, Mechel Targoviste, Laminorul Brăila (the Brăila Rolling Mill) - and of the Mechel East Europe Metalurgical Division company, is fully in line with the updated strategy of OAO "Mechel", which stipulates the development of the priority divisions of the business, "particularly the consolidation of the top position in the production of metallurgic coal", according to Evgeny Mikhel, the managing director of OAO "Mechel", who commented: "This deal represents a step towards the updated strategy of OAO < Mechel >, which is aimed at developing the directions of key products and the sale of the businesses which do not fit the profile. Some time ago, we have announced our intentions to exit the European metallurgic sector, which under the current circumstances and foreseeable future, remains a chronic money-losing field. This not only affects the financial results and the cashflow of the Group, but also increases expenses, which is something we can't afford, given the fact that we invest in projects with good prospects, such as the Elga deposit and the Universal rolling mill for Railway tracks. At an expected loss of 2.4 billion rubles (ed. note: approximately 60 million Euros), in 2013 in the Romanian plants, the current deal will have a positive financial effect for our shareholders. The released cash-flows will be directed towards operating activity, as well as towards reducing the company's debt".

Last year, all of the four production units of "Mechel" suspended their operations, with the exception of a few divisions, "due to the unfavorable pricing context on the European metallurgic markets, amid the increase in the price of scrap iron and low demand for finished products", according to the management of the corporation, which mentions that "all the measures have been taken for maintaining the functionality of the production and maintenance equipment".

The "Mechel" group has been present in Romania since 2002, and currently has about 5,000 employees.