Demerger from Evraz expected to help Raspadskaya play consolidating role on Russian coking coal market

MOSCOW. Dec 16 (Interfax) - The demerger of Evraz's coal division, Raspadskaya , will help the latter become a consolidating player on the Russian coking coal market, the steel and mining group said in a circular released ahead of the demerger.

The "Russian coking coal space is fragmented, with the five major producers holding only a 60% segment share in 2020 in terms of raw coking coal output," Evraz said. "Since RASP is the largest coking coal producer, it could be in a favourable position should it decide to participate in potential market consolidation."

Evraz's board on Wednesday approved the demerger of the group's coal business, which is consolidated in PJSC Raspadskaya. Evraz shareholders are expected to vote on this issue at a meeting on January 11 that will be held in person at the offices of Linklaters LLP at One Silk Street, London.

The demerger will be carried out by distributing all of Evraz's shares in Raspadskaya (90.9% of total common shares in the company listed on the Moscow Exchange) to Evraz shareholders. They will get 0.4255 Raspadskaya shares for every Evraz share they hold as of February 15, 2022.

The companies of Evraz's principal shareholders - billionaire Roman Abramovich's Greenleas International Holdings, Alexander Abramov's Abiglaze Ltd. and Alexander Frolov's Crosland Global Ltd., which now own 57.61% of Evraz, will own at least 53.72% of Raspadskaya.

There will also be a cash alternative to receiving shares in the coal company. The distribution of shares in Raspadskaya to Evraz shareholders is planned for April 7, and the sale of shares under the cash alternative is expected to take place in October 2022.

Following a Raspadskaya shareholder meeting scheduled for January 27, 2.5% of treasury stock in the coal company is expected to be cancelled. The number of independent directors on Raspadskaya's board could increase to five if the demerger is approved.

The dividend policies of Evraz and Raspadskaya are expected to remain unchanged.

Raspadskaya supplies about 70% of Evraz's coal. The two companies will have trade agreements to the end of 2026, including two new long-term contracts, under which Raspadskaya will supply up to 60% of Evraz's coal needs after the demerger. Trading subsidiary Evraz East Metals will continue to sell coal purchased from Raspadskaya for 15 months after the demerger.

During a transition period that will take about one year, some Evraz companies will continue to provide administrative and support services to Raspadskaya after the demerger.

Evraz owns about 90.9% of PJSC Raspadskaya, 2.5% of shares are held by this company itself following repurchase from minority shareholders in an offer, and the free float is about 6.6%.