New World Resources, the London-listed Czech coal mining group, is to buy 25 per cent of Ferrexpo, a Ukrainian iron ore producer whose owner had been forced to sell off part of his stake in the company after it plunged in value, according to Financial Times.
NWR said that it would pay pound126.6m ($217.5m), or 86p a share, for the stake in Ferrexpo acquired this month by NWR’s majority shareholder, RPG Industries, the investment vehicle of the Czech billionaire Zdenek Bakala. The purchase will be funded from NWR’s existing cash and the company expects to be offered a place on Ferrexpo’s board.
“It is very complementary to our presence in the region,” said Miklos Salamon, NWR’s chairman, adding that the purchase would give NWR a strategic partner in Ukraine, with some of Europe’s largest coal and iron reserves.
NWR, through its subsidiary OKD, is the largest hard coal producer in the Czech Republic and has begun analysing investments in Polish coal mines.
Ferrexpo, which has its headquarters in Switzerland and briefly entered the FTSE 100 this year, produces more than 9m metric tons of iron ore pellets a year – of which 85 per cent is exported to steelmakers around the world – as well as a further 30m metric tons of iron ore. Both companies are listed on the London Stock Exchange.
“We have got the region’s pre-eminent coal producer and pre-eminent iron ore producer in a significant alliance,” added Mr Salamon.
Ferrexpo is controlled by Kostyantin Zhevago, a Ukrainian billionaire businessmen and politician, who was faced with a margin call by JPMorgan after Ferrexpo’s shares were hit by the sell-off in commodities stocks.
Shares in Ferrexpo have dropped 84 per cent since May and closed at 77p on Monday. Mr Zhevago still holds 51 per cent of the company through his investment vehicle Fevamotinico.
Mr Bakala, who has made a fortune by investing in distressed heavy industries, quickly seized on Mr Zhevago’s troubles. “The only reason there was a deal was because of current circumstances,” said Mr Salamon.
By Jan Cienski in Prague, Financial Times, London, UK
