OREANDA-NEWS. OMZ (Uralmash-Izhora Group) (OMZ) and Metalloinvest have agreed on the creation of a common manufacturing complex. OMZ will contribute its holdings in Urals Heavy Machinery Plant (Uralmash), Uralmash Specialty Steel, OMZ Crushing and Grinding Equipment and OMZ Crane to the joint venture (JV) while Metalloinvest will contribute its holdings in ORMETO-YuUMZ.

According to the press service of OMZ, the consolidation of the assets situated on two manufacturing sites, in Ekaterinburg and Orsk, will result in the creation of a large machine-building conglomerate with a leading position in the CIS metallurgical equipment market. The joint market share of ORMETO-YuUMZ and Uralmash in the metallurgical equipment segment in Russia exceeds 40%, which would make the JV a leader in the fast-growing domestic market of metallurgical equipment upgrades, modernization and servicing.

The joint venture will be able to provide a full range of new metallurgical equipment and services to existing clients such as Evraz Holding, MMK, Severstal, NLMK, Mittal Steel, Ural Steel, OEMK and others. This is especially important in the current period of extensive modernization of existing domestic metallurgical facilities and the creation of new ones.

The integration of Uralmash and ORMETO-YuUMZ, facilities historically designed to complement each other, will allow the centralization of the marketing, product promotion and sales policies, the coordination of the product offering with regards to metallurgical equipment and its servicing, the optimization of the production planning process and capital expenditure allocations and the coordination of the engineering talent at both sites. These should become the major synergy sources for the joint venture.

Based on a valuation prepared by an independent appraiser, OMZ’s holdings in the companies to be contributed to the JV are valued at US$125 million, while Metalloinvest’s holdings in ORMETO-YuUMZ have been valued at US$100 million. OMZ and Metalloinvest will each hold a 50% share in the joint venture. The share capital of the joint venture will consist of OMZ’s shares in Uralmash (including Uralmash Specialty Steel, OMZ Crushing and Grinding Equipment and OMZ Crane), Metalloinvest’s shares in ORMETO-YuUMZ and cash.

It is intended that the joint venture will be registered as a closed joint stock company in Ekaterinburg and will be named “Russian machine-building corporation “Uralmash”. The terms of the venture will be put to vote at the next meetings of the Board of Directors of OMZ and Metalloinvest, respectively, in accordance with all necessary corporate actions relating to this transaction. In addition, both sides will apply for the relevant approvals and permits in accordance with Russian Law.