Vladimir Lisin does not want to die for metal

It cannot be said that the probable sale of NLMK’s long products division could become the deal of the century, but rumors about negotiations with IMH by Yevgeny Zubitsky and Novostal-M by Ivan Demchenko made a lot of noise. Among the possible reasons for the sale of a valuable asset, market experts did not name one, perhaps the most important one.

Most entrepreneurs prefer not to announce or comment on upcoming major deals. They are probably afraid of “jinxing it.” This position is not unfounded when it comes to billions of dollars. Therefore, it is not surprising that NLMK called rumors the information leaked to the press that Vladimir Lisin’s group of companies is negotiating the sale of its long products division – plants in the Urals and in the Kaluga region that produce rolled products for construction purposes (rebar, beam, channel, etc. .). But there is no smoke without fire, especially since NLMK has already tried twice to sell the NLMK-Metiz, NLMK-Ural and partially NLMK-Vtorchermet plants – in 2020 and 2021. Then the total capacity of the Ural plants was estimated at 2 million tons of finished products per year. This corresponded to 16-20% of the entire Russian market for fittings, wire rod and hardware. Now, as Vedomosti found out, NLMK-Kaluga with a capacity of 0.9 million tons of long products per year is also put up for sale.

It is worth noting that the Ural factories now owned by NLMK Vladimir Lisin are a legacy of the Soviet era. These enterprises were put into operation in the 1920-1960s of the last century. Perhaps they have not been sold so far because the old plants turned out to be insufficiently attractive objects for a potential buyer, although funds were invested in their modernization. But the electrometallurgical enterprise in Kaluga is a plant of a new generation, it began operating only ten years ago, in 2013. The implication is that this mini-mill is supposed to increase the overall attractiveness of the lot.

Potential Buyers

Evgeny Zubitsky’s Industrial Metallurgical Holding is named among the potential buyers of NLMK’s long products division. IMH is one of the largest Russian mining and smelting companies.

This “ore empire” was founded by Yevgeny’s father, Boris Zubitsky. Zubitsky Sr. began his career as a mechanic at the Kemerovo coke plant and rose to the head of the production department. In the mid-1990s, when the enterprise was transformed into PJSC Koks, Boris Zubitsky became its general director. It can be said that the father’s career largely predetermined the future of his son Yevgeny, who began his career as a gasman at the same plant. By the end of the 1990s, Boris Davydovich decided to focus on politics, and to transfer the reins of government to his sons, distributing assets between Evgeny and Andrey Zubitsky.

My father was a deputy of the State Duma of several convocations, the business empire grew in the hands of his sons, and everything was fine until his death in 2017, after which an “internal corporate conflict” broke out in the IMH – in other words, the battle for the inheritance. Billion-dollar claims to Yevgeny Zubitsky were made by brother Andrey and his wife Victoria Kazak. Some of the claims were rejected by the court for lack of evidence, and recently the family-corporate scandal has subsided.

Ivan Demchenko Jr., OOO Novostal-M, is called another contender for NLMK’s long products division. This metallurgical holding combines the Abinsky Electrometallurgical Plant in the Krasnodar Territory and the Balakovo Metallurgical Plant in the Saratov Region.

The founding father of this “steel empire” is Ivan Demchenko Sr. The future “steel king of the South of Russia” changed several jobs before founding and heading Novorosmetall LLC, from which Novostal subsequently grew. Having created a solid material basis for himself, at the beginning of the 2000s, Demchenko Sr. went into politics and is now a State Duma deputy. And the business empire continues to develop son Ivan – one of the four heirs of the “steel king”. Moreover, he does this in a versatile way, diversifying assets: not so long ago it was reported that he became the owner of the Kurbatovo elevator in Voronezh, and before that he had also acquired Kubanvinagro (viticulture) and Deagro (wholesale grain).

Other children of the deputy are also successfully engaged in business. But it is curious that it was the son Ivan who became the trusted manager of the “steel empire”. The fact is that the older Demchenko is also called Ivan Ivanovich. Thus, in documents available in open sources (without indicating personal data), full namesakes differ only in the year of birth, and it is not immediately possible to understand who owns what. A convenient family tradition, one might say.

They also name a third contender for the purchase of NLMK’s long products division. This is Akron Holding by Pavel Morozov. A full-cycle metallurgical enterprise specializes in the procurement and processing of scrap, as well as the disposal of vehicles and household appliances. And if the interest of the first two potential buyers may be to seize the competitor’s enterprises, then the third one could extend its technological chain through this acquisition by setting up the remelting of scrap to produce more marginal products.

However, the Federal Antimonopoly Service has not yet received applications for approval of such a deal from any of the possible applicants. It should be borne in mind that this is not a quick matter when it comes to really large amounts.

Balancing on the edge

But what are the reasons for another attempt by Vladimir Lisin’s group of enterprises to get rid of a large asset? In our opinion, both obvious and hidden motives are worth mentioning here.

Among the obvious reasons, metallurgical market experts indicate a whole range of factors that could work both individually and in combination. For example, long products are not exactly the core asset of NLMK, which historically specializes in flat products. And if flat steel is used in the automotive industry, which now in Russia, whether you like it or not, will be developed due to sanctions and the withdrawal of many foreign automotive brands from the Russian market, then there is no such certainty with long products used in construction. Thus, by selling the long products division, NLMK will be able to optimize its assets in the direction of increasing their profitability.

Maybe NLMK urgently needed money? This is quite possible, money is not superfluous. Moreover, the company has not published financial statements since 2021. The proceeds from the sale of the high-quality division could be used … but anywhere, even for the payment of special dividends, which investors will be very happy about. Especially – the main shareholder Vladimir Lisin.

However, there is also an implicit reason for the likely sale of NLMK’s long products division, which we can assume based on the behavior of Vladimir Lisin himself and the attitude towards the Russian oligarch in the West. Judge for yourself: he was not noticed at the meeting of the President of the Russian Federation with business representatives in the Kremlin on February 24, 2022 and at the online meeting of the head of state with domestic metallurgists on April 20 of the same year. Moreover, Lisin opposed the decision of the Russian leadership to switch to ruble settlements, saying that such a move would “throw NLMK out of international markets.”

These statements made in the public plane could be explained by the fact that Lisin himself has long been living in his Scottish castle on the estate of Comrie, Perthshire. However, for example, now former Russian bankers Mikhail Fridman and Pyotr Aven, such tactics did not save from the arrest of accounts. And, unlike them, Lisin does not complain about “harassment.” NLMK’s subsidiaries in the EU and the US continue to operate despite the introduction of restrictive measures against the Russian steel industry.

Analysts also note that NLMK’s business model is mainly export-oriented. While the sorts division put up for sale is mainly focused on the domestic Russian market. Perhaps this is the real reason for trying to get rid of this asset – the desire to maintain NLMK’s presence in the international market, which Lisin, in his own words, won for many years with great difficulty.

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