3 Mar 2010 19:39

Ukraine's Metinvest thought to be among potential buyers for Severstal's Lucchini

MOSCOW. March 3 (Interfax) - Ukraine's Metinvest is thought to be among the potential buyers of Severstal's Lucchini plant in Italy.

Steel Business Briefing quoted sources as saying potential buyers started to perform due diligence at Lucchini on Monday.

The sources said the potential buyers included four industrial companies and one fund. Two of them are rumored to be Italian, perhaps Riva and the Lucchini family itself, despite the latter having sold an option to buy the remaining 20% of the Lucchini company to Severstal.

Steel Business Briefing's sources think Metinvest and Sidenor, the Spanish division of Brazil's Gerdau, are among the potential foreign buyers.

SBB says the deal could be complex and protracted as liquidity is fairly tight in the European steel market. The price could be lowered considerably at negotiations, and Severstal might get far less than the EUR 499 million it paid for Lucchini back in 2005.

The Russian company said at the beginning of February that it was not ruling out the sale of some of its interest in Lucchini to a strategic investor.

It was thought Severstal might have to honor a put option to buy the remaining 20% of Lucchini for EUR 160 million if it did not manage to sell its 80% of the steel company by April. However the Lucchini family sold the option to Severstal for EUR 100 million this week.

Lucchini generated around 15% of the Severstal group's sales revenue in 2008.

However the Italian plant has suffered from the drop in demand for steel product caused by the global crisis. Its revenue plummeted to $1.2 billion in 9M 2009 from $3.3 billion in the same period of last year, and its profit margin from 13% to negative 17%. By comparison, Severstal's Russia-based operations had a profit margin of 18% and its North American division had almost 19% in the 9M of 2009.