Metinvest obtains permission to acquire Dniprovskyy Coke

Ukraine’s largest steelmaker Metinvest (METINV)
obtained permission from the Antimonopoly Committee of Ukraine to acquire
Dniprovskyy Coke, a Ukrainian coke producer, according to an Apr. 18
Interfax-Ukraine report, which cited the committee’s press secretary.
Dniprovskyy Coke’s annual coke production capacity amounts to about 700 kt
(2018 production: 619 kt).

The four offshore companies that have owned 23.6% of
Dniprovskyy Coke each since the end of 2013 are affiliated with the owners of
Metinvest, namely, with the SCM and Smart groups, according to press reports.

Three of these companies – Altana Ltd (BVI), Misandyco
Holdings Ltd (Cyprus), and Mastinto Trading Ltd (Cyprus) – own a total of about
49% of Pokrovske Coal assets, whose 2018 production volume was about 2.6 mmt of
coal concentrate, according to Concorde Capital’s analysis.

Recall, Metinvest purchased 24.99% in
Pokrovske Coal assets in July 2018 together with
what the holding said were its four co-investors.

In 2017, Dniprovskyy Coke produced 675 kt of coke and
earned EBITDA of USD 59 mln.

Dmytro Khoroshun: We
calculate that Dniprovskyy Coke’s 2017 EBITDA per ton of coke produced, USD
87/t, was higher than at the two coke plants that Metinvest already controls,
Avdiyivka Coke (USD 47/t) and Zaporizhcoke (USD 56/t).

We estimate that it might cost Metinvest USD 250-350
mln to acquire Dniprovskyy Coke from the latter’s current owners. This includes
about USD 20 mln of debt we estimate Dniprovskyy Coke had at the end of 2018.
Metinvest will find stable demand for Dniprovskyy Coke’s products from Dniprovskyy
Steel, which needs more than 1 mmt of coke per year.