LNM Offers EUR 100 Million for Kremikovtzi

LNM Offers EUR 100 Million for Kremikovtzi

Commercial consideration, it’s known, always rules over relationship in business. The latest example is the Pramod Mittal-owned Bulgarian steel company Kremikovtzi, which is up for sale, The Times of India reports.

Mr Pramod Mittal’s elder brother and the world’s richest Indian Lakshmi Nivas Mittal is keen to acquire the Balkan country’s largest steelmaker. But he is learnt to have quoted eur 100 million (Rs 630 crore), which is nearly 50 million euro lower than what his younger brother wants from the sell-off. At this rate, Mr Lakshmi Mittal’s total cost of acquisition, including debts, will be around Rs 5,200 crore.

Sources said although Mr Lakshmi Mittal’s bid is lower than Mr Pramod Mittal’s expectation, the senior Mittal is expected to win the race for two reasons. One, the Bulgarian government, which holds a 25% stake in Kremikovtzi, is supportive of his bid. Two, Mr Lakshmi Mittal may win the confidence of the investors as he promised to pay out the full nominal value of bonds issued by the Bulgarian company, they added.

Creditors demanded immediately repayment of Kremikovtzi’s e 325 million bond as the company has defaulted on the payment. Mr Lakshmi Mittal’s ArcelorMittal has also proposed to carry on investments on ecological issues as well, sources said.

Also, ArcelorMittal, if it manages to win the bid, will have synergy in running the Bulgarian company as it has a vast iron ore mine in Krivhyrih in Ukraine from where it could transport ore. Kremikovtzi does not have its own captive ore reserves. It accounts for more than 10% of Bulgaria’s exports.

Although Mr Pramod Mittal did not receive bid up to his expectation, his selling price is still expected to be higher than his acquisition cost. His investment firm, Global Steel Holdings, bought Kremikovtzi in 2005 for 72 million euro. Sure, he has made some investments in Kremikovtzi in the past three years. He has put Kremikovtzi on the block after its debts went up to $1.14 billion (approximately Rs 4,540 crore).

In addition to ArcelorMittal, other prominent bidders include Ukrainian billionaires Rinat Ahmetov and Konstantin Jevago. Merrill Lynch, advisor to the seller, is going through the bids and is expected to announce the name of the successful bidder in a fortnight, sources said.

An e-mail sent to ArcelorMittal’s spokesperson did not elicit any response. A spokesperson for Global Steel Holdings declined to comment. Kremikovtzi has a production capacity of 2.2 million tonne. Last year, it produced 1.4 million tonne of steel. The debt burden and spiralling raw material costs put pressure on the company’s cash flow. Recently, it failed to pay its 8,000 workers. If ArcelorMittal manages to bag Kremikovtzi, it will be the first transaction between the Mittal brothers after the elder brother left the country to carve out his own empire in 1994.

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