London-listed NLMK, owned by Russia's third-richest man, Vladimir Lisin, said Wednesday that it was in talks to form a joint venture with Duferco Participations Holding that would acquire steel facilities currently owned by Duferco.
It expects a deal to be completed by the end of this year.
"Duferco has a strong steel distribution network in Europe and the United States, and NLMK's basic strategy aims to acquire assets providing a wide supply network to end-users," said Denis Nushtayev, an analyst with Metropol.
Russian steel tycoons are keen to participate in a global consolidation trend in the sector. Severstal, the country's largest steelmaker, lost out to Mittal in its bid for Arcelor earlier this year.
NLMK did not disclose the value of the potential deal nor the size of the stake it wanted in the joint venture.
Anton Bazulev, NLMK's deputy CEO for external relations, declined to add more details to those in the statement.
UralSib Bank estimated the price of the deal at $2 billion to $3 billion, based on 2005 financial performance. Troika Dialog analyst Sergei Donskoi valued Duferco at $1.5 billion to $3 billion, but said much would depend on the value and debt of each individual enterprise.
Metropol's Nushtayev said a 51 percent stake in Duferco would cost $4 billion to $4.5 billion, including a premium for control of the company.
Lisin, whose personal fortune was estimated at $11.3 billion by Forbes magazine this year, last month said his company, also known as Novolipetsk Steel, wanted to buy about 3.5 million tons of steel-rolling capacity by 2011.
NLMK said in a statement the joint venture would acquire assets owned by Switzerland-based Duferco, including Duferco Farrell in the United States and Belgian companies Carsid, Duferco Clabecq and Duferco La Louviere.
Planned acquisitions also included Duferco Coating, Sorral and Duferco Transformation Europe in France, as well as Acciaierie Grigoli in Italy, NLMK said.
The transaction is subject to negotiation and execution of a definitive agreement and competition and other approvals.
Duferco, based in the Swiss town of Lugano, was founded in 1979, originally as an exporter of steel from Brazil. Founder and CEO Bruno Bolfo is on the board of another Russian steelmaker, Evraz Group.
Duferco is a previous owner of VIZ-Stal, an electrical steelmaker in Yekaterinburg that NLMK paid $550 million to acquire this year.
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