Mittal Steel buys Ukrainian Kryvorizhstal, purchase being part of privatization campaign

The world's largest steel producer, Mittal Steel Co., bought Ukraine's flagship steel plant Kryvorizhstal from the state in a televised auction Monday for more than US$4.8 billion (Ђ4.02 billion). The high-stakes auction had been a campaign promise of President Viktor Yushchenko, part of his bid to prove to investors that the former Soviet republic is committed to transparency and open for foreign investment. Yushchenko was there to watch.

Mittal Steel bought the mill for 24.2 billion hryvna, well above what analysts had predicted and more than five times what former President Leonid Kuchma's son-in-law and another Ukrainian tycoon paid for the mill in 2004, a sale that Yushchenko called a theft and that was annulled after he became president this year.

The sale of Kryvorizhstal, which produces 20 percent of Ukraine's entire metal output, becomes the single largest foreign investment ever in this former Soviet republic. It also brought in 20 percent more cash than all of Ukraine's other privatizations combined, Yushchenko said.

Competing against Netherlands-based Mittal was the Industrial Group Consortium, which brings together the Industrial Union of Donbass and the world's second-largest steel producer, Luxembourg-based Arcelor SA, as well as the Ukraine-registered LLCSmart-Group.

The auction began with all three companies sticking sealed envelopes in a glass bin. State officials pried open the case and using scissors and sliced apart the envelopes to read the starting bids. The consortium linked to Arcelor had offered the highest starting price, 12.6 billion hryvna (about US$2.5 billion, Ђ2.1 billion).

The sale then went to an open auction.

Representatives of the three competing companies sat at separate desks and raised white placards to hike the price up in 100 million hryvna (US$20 million, Ђ16.6 million) increments. The main bidding soon was between Mittal and the Arcelor consortium.

As the bidders raised the price, people in their teams frantically worked the phones. The mood was tense, with the auctioneer repeatedly going down to "one ... two ..." before a bidder stepped in and raised the price again, the AP reports.

Former Prime Minister Yulia Tymoshenko, who had spearheaded the privatization effort, flashed a huge smile when the bidding ended.

The decision to sell such an industrial gem, however, was not universally popular. Some 150 protesters gathered outside the State Property Fund, which conducted the sale, chanting and holding placards reading: "The People Own Kryvorizhstal." A metal fence was erected around the building, with police and community volunteers, wearing orange, standing guard.

Parliamentary critics twice last week mustered enough votes to press the government to halt Monday's sale of the 93.02 percent stake in the mill, but Yushchenko shrugged off their nonbinding appeal, just as he has the legal challenges waged by the mill's former owners.

T.E.