OREANDA-NEWS. October 4, 2012. EVRAZ plc (LSE: EVR) ("EVRAZ") announces that it has agreed the terms of the acquisition of an indirect controlling interest in OJSC Raspadskaya and its subsidiaries ("Raspadskaya") (the "Acquisition").
EVRAZ has agreed to purchase a further 50% interest in Corber Enterprises Limited ("Corber") from Adroliv Investments Limited, a company owned by the sellers (the "Sellers"), which holds an 82% interest in Raspadskaya. EVRAZ has an existing holding of 50% of Corber and, following completion of the Acquisition, will hold an indirect interest of 82% in Raspadskaya’s shares. The remaining 18% of Raspadskaya's shares will remain listed on the Russian Stock Exchange, MICEX-RTS.
As consideration for the Acquisition, EVRAZ will (i) issue 132.7 million new shares representing 9.9% of the existing issued share capital of EVRAZ (the "New EVRAZ Shares"); (ii) issue 33.9 million new warrants to subscribe for 33.9 million new shares representing 2.53% of the existing issued share capital of EVRAZ (the " Warrants"), and (iii) pay an amount, in cash, of USD 1,949.80 for each of 103,600 ordinary Corber shares, payable in four equal instalments in Q1, Q2, Q3 2013 and Q1 2014. The Warrants may be exercised at any time between 12 months and 15 months after completion of the Acquisition and the Warrants contain customary provisions relating to adjustments. Upon exercise of the Warrants, it is expected that the Sellers would own 11.06% of EVRAZ.
Completion of the Acquisition is expected to occur in Q4 2012 subject to receipt of customary regulatory approvals and satisfaction or waiver of other conditions.
Raspadskaya is one of Russia’s largest producers of coking coal based on volume of production in 2011 and is located in the Kemerovo region of the Russian Federation. Raspadskaya is already a key supplier of coal to EVRAZ and EVRAZ is Raspadskaya’s largest customer.
According to the international consulting firm IMC, as of 31 December 2011, the total proved and probable coal reserves of Yuzhkuzbassugol, EVRAZ’s producer of coking coal, were estimated to be approximately 632 million tonnes. As of 31 December 2011, according to IMC, Raspadskaya had proved and probable coal reserves of 1,314 million tonnes.
EVRAZ’s net leverage ratio as at 30 June 2012 was 2.48x. Corber’s net debt at 30 June 2012 was USD 330 million and the pro forma net leverage of the combined entity as at this date would have been 2.39x.

Alexander Frolov, CEO, EVRAZ plc, said,

 “The acquisition will increase EVRAZ’s coking coal self-coverage, which is consistent with EVRAZ's stated strategy of growth in the raw materials for steelmaking.

 Raspadskaya is already a key supplier of coal to EVRAZ and EVRAZ is Raspadskaya's largest customer. Through holding an equity interest in Raspadskaya since 10 March 2004 and having directors on the Board of OJSC Raspadskaya, EVRAZ has a clear understanding of the strengths and potential of Raspadskaya's business and is best positioned to benefit from acquiring an indirect controlling interest in Raspadskaya.

 Following completion of this acquisition EVRAZ will become the largest producer of coking coal in Russia. We believe that the acquisition of Raspadskaya will generate substantial operational synergies to EVRAZ, including the optimal use of different coal grades in the combined portfolio.

 We value the strong expertise of the management team and we are happy that Mr Kozovoy, who has been the chief executive officer of Raspadskaya since December 1993, and has successfully helped to transform it into one of the largest coal mining companies in Russia, will stay in this position until at least the end of 2013.“

Summary of the Conditions to the Acquisition

 The Acquisition is subject to certain conditions and other terms, which are summarised below, and completion will only occur if, among other things, the following events occur on or before 15 January 2013 or such later date as EVRAZ and Raspadskaya agree:

 a) EVRAZ having received pre-transfer merger clearance from the Russian Federal Antimonopoly Service in connection with the Acquisition;

 b) the share prices of EVRAZ or Raspadskaya not falling below certain pre-agreed levels; and

 c) satisfaction or waiver of certain other conditions, including, without limitation, the receipt of authorisations, orders, confirmations, consents, clearances, permissions or approvals required under any law of any jurisdiction either without conditions or subject to conditions which are acceptable to EVRAZ (acting reasonably).

 On the basis that all the conditions as outlined above are satisfied or waived, the Acquisition is expected to complete in Q4 2012.

Settlement, Listing and Dealings of the New EVRAZ Shares

The New EVRAZ Shares issued to the Sellers pursuant to the Acquisition will rank pari passu in all respects with the EVRAZ shares in existence at the date of this announcement.

 Applications will be made:
to the UKLA for the New EVRAZ Shares to be admitted to listing on the Official List; and
to the London Stock Exchange for the New EVRAZ Shares to be admitted to trading on the Main Market.

A conference call for investors and analysts to discuss the Acquisition hosted by Alexander Frolov, CEO, and Giacomo Baizini, CFO, will commence on Thursday, 4 October 2012 at:

1:30 pm (London Time)
4:30 pm (Moscow Time)
8:30 am (New York Time)

 Conference call dial-in details:

0 800 694 0257 in the UK (toll-free)
8 10 800 2097 2044 in Russia (toll-free)
1 866 966 9439 in the USA (toll-free)

+44 (0) 1452 555 566 International Dial-in

Conference ID 36652333

 To avoid any technical inconveniences it is recommended that participants dial in 10 minutes before the event start time.

The conference call playback will be available until 5 October 2012.

 Participants requesting the playback should dial:

0 8717 000 145 in the UK
1 866 247 4222 in the US
+44 (0) 1452 550000 International Dial-in

 and enter the Code 36652333 followed by the # sign.

 The presentation will be available on the Company’s website http://www.evraz.com/investor/presentations shortly before the call.