Oriel Resources agrees takeover by Russia's Mechel

Oriel Resources agrees takeover by Russia's Mechel

By Toby Shelley and Isobel Gorst

Published: March 27 2008 02:00 | Last updated: March 27 2008 02:00

Mechel, the Russian miner and steelmaker, has agreed a £749m takeover of London-listed Oriel Resources, a mining company with assets in Russia and Kazakhstan.

Mechel, Russia's third-biggest coal producer and leading stainless steel maker, first said it was contemplating the move at the beginning of March.

The cash offer of 109.97p is a 13.7 per cent premium on the closing price of 96¾p for Oriel shares last week. The Russian company will fund the acquisition from existing resources and a $1.5bn (£748m) loan facility.

Oriel's main assets are a chromite mine and a nickel project in Kazakhstan and a ferrochrome smelting plant near St Petersburg in Russia. Mechel said these assets fitted well with its own plans to expand its ferroalloy division.

The Russian company is 25 per cent owned by Alexander Nesis, an associate of billionaire Roman Abramovich.

Igor Zyuzin, chief executive, founder and majority shareholder of Mechel, said: "The acquisition of Oriel will enable Mechel to increase its competitiveness by expanding the existing ferroalloy business, entering new markets and operating new production facilities."

The acquisition of Oriel marks a first move into resource-rich Kazakhstan for Mechel which owns assets in Romania, the Baltics and Bulgaria.

Listed in New York since 2004, Mechel had revenues of $4.4bn and net profits of $603m in 2006.

The offer has been recommended by Oriel's board and shareholders have already given irrevocable undertakings covering 46.6 per cent of the equity.

Oriel listed on Aim in 2004. After a reverse takeover in 2006 it was readmitted in December 2006. That year it made a pre-tax loss of £3.6m.

The shares closed up ½p yesterday at 106½p. They have risen strongly from about 60p since Oriel announced it was in talks.