Metinvest affiliate Pokrovske priced at USD 734 mln in recent deal

A 40.8% stake in Pokrovske Coal (SHCHZ UK), Ukraine’s
largest coking coal miner, changed hands on July 19 for a total consideration
of UAH 7.9 bln, which was exactly USD 300 mln at that date, as reported on the
company’s page with Ukraine’s stock market regulator. This values the total
equity of the company at USD 734 mln.

A 100% stake in CJSC Donetsksteel, a Ukrainian
producer of coking coal concentrate, changed hands on July 19 for a total
consideration of UAH 5.5 mln (USD 0.2 mln).

Pokrovske Coal also reported on Aug. 10 that its board
is convening an EGM on Sept. 12. The EGM has a broad agenda, including
replacing supervisory board members and changing the company’s statute and
by-laws.

Recall, Metinvest (METINV), Ukraine’s largest
steelmaker, together with companies likely affiliated with its owners, acquired a 100% stake in CJSC Donetsksteel
and 57.3% in Pokrovske Coal via a
company named Industrial Coal Holding LLC (ICH). Metinvest B.V. owns 24.99% in
both CJSC Donetsksteel and ICH.

Pokrovske Coal also recently reported that a 40.8% stake of its shares changed hands,
but that the new owners of that stake are unknown.

Ukraine’s largest steelmaker Metinvest (METINV) –
together with companies likely affiliated with its owners, including majority
owner SCM – acquired 100% ownership in Ukraine’s producer of coking coal
concentrate Donetsksteel and possibly a 40.8% stake in Ukraine’s largest coking
coal miner Pokrovske Coal (SHCHZ UK).

Dmytro Khoroshun: If the USD
300 mln that was paid for the 40.8% stake is real money (as opposed to just a
leg of a complex payments scheme), that would mean that Metinvest’s effective
stake in Pokrovske Coal, 14.3%, is worth USD 105 mln. However, Metinvest might
also be financing the entire 57.3% stake that ICH owns, which is worth USD 421
mln.

If Metinvest acquires and consolidates both the
57.3% and the 40.8% stakes in Pokrovske Coal at the valuation reported above
for USD 721 mln (assuming USD 1 bln in debt and USD 100 mln of EBITDA for the assets acquired), its Net Debt / EBITDA
will grow to 1.7x from 1.0x at the end of 1Q18.