World No. 1 steelmaker buys Kryvorizhstal for $4.8B

Mittal group the world's No. 1 steelmaker, won an auction for Ukraine's biggest steelmaker VAT Kryvorizhstal with a bid of 24.2 billion hryvnia ($4.8 billion), the most ever for a state asset in the former Soviet Union.

Rotterdam-based Mittal Steel Co., will get 93 percent of the mill, increasing production capacity and cutting its dependence on coal and iron ore producers. It beat Arcelor SA and Ukraine's LLC Smart Group in an auction in Kiev shown live on state television today. Mittal's bid is more than double the minimum 10.1 billion hryvnia Ukraine had set for the sale.

Mittal needs to expand in emerging markets to increase capacity and strengthen its bargaining power with carmakers and suppliers of iron ore and coal. The winning bid represents 6.8 percent of Ukraine's probable 2005 gross domestic product, said Timothy Ash, managing director at Bear Stearns International.

The sale may end 16 months of legal wrangling over ownership as President Viktor Yushchenko seeks to demonstrate that foreign companies can feel safe about investing in a country wracked by political turmoil for the past year.

"This is good news for the Yushchenko administration in the run-up to the March 2006 elections," Ash said in an e-mailed note to clients, reports Bloomberg.

The proceedings were conducted in a small room in the presence of high-profile guests, and were broadcast live on television.

Industrial Group had started off the bidding with a sealed submission of about $2.5 billion against $2.08 billion for the other two entrants. Authorities had set a starting price of about $2 billion.

The auction was seen as a key event in defining the reformist agenda of the administration propelled to power by last year's "Orange Revolution" rallies.

It was also touted as a chance to coax back Western investors made wary by the chaotic first eight months of the liberal administration under now sacked Prime Minister Yulia Tymoshenko.

Throughout the long campaign that ultimately led to his victory, Yushchenko denounced as "theft" the plant's original sell-off in June 2004 for $800 million, below other offers, reports Reuters.

P.T.