Magnitogorsk Iron & Steel Works, or MMK, bought control of Siberian coal miner Belon on Friday, doubling its stake to 82.6 percent to secure stable raw material supplies for the country’s largest steel mill.
MMK said in a statement that supplies from Belon’s mines would provide the bulk of its coking fuel needs, ending the company’s isolation as the only Russian steel major without control of its own coal resources.
It did not disclose the purchase price.
The Federal Anti-Monopoly Service approved the deal earlier Friday.
“This transaction brings MMK’s self-sufficiency in strategically important input materials to a new level,” Viktor Rashnikov, MMK’s majority owner and chairman, said in the statement.
Magnitogorsk is Russia’s third-largest steel maker, after Severstal and Evraz Group, and operates the country’s largest single steel plant. Unlike its peers, MMK was required until now to buy its coking coal on the open market — an advantage when raw material prices are low, but increasingly costly when they rise.
MMK has gradually built up its stake in Belon after first entering the Novosibirsk-based miner as a minority shareholder. It already owned 41.3 percent before buying out its partner, Belon chief executive Andrei Dobrov, on Friday.
Reuters data showed that an 82.6 percent stake in Belon would be worth $682 million at current prices. MMK would therefore have paid half of this amount, $341 million, to double its stake if it paid market price.
Magnitogorsk now owns 100 percent of Onarbay Enterprises, which in turn owns 82.6 percent of Belon Group. The other 17.4 percent of Belon’s stock is in free float.
The deal was announced after markets closed in Moscow. Belon closed down 1.9 percent, in line with a 1.8 percent drop on the wider MICEX Index.
MMK said it would continue to implement Belon’s investment program. The miner produced 5.5 million tons of coal last year, including 2.9 million tons of coking coal, and posted a net profit of $124 million. Belon is also a steel trader.
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