20 December 2012
Group DF acquires 49% equity in Zaporozhye Titanium & Magnesium Combine
Group DF’s acquisition of a stake in Zaporozhye Titanium & Magnesium Combine (ZTMC) will allow Ukraine to strengthen its positions at the global titanium sponge market, pledged Group DF owner Mr. Dmitry Firtash commenting on the outcomes of a tender on engaging an investor in the Zaporozhye Titanium & Magnesium Combine LLC.
“I am sure that titanium faces very promising future in essentially each sector of the economy. Business interests of such global players as Boeing and Airbus are focused on the titanium market, aerospace industry is vibrantly evolving, demand for titanium is growing in the health care industry. At the moment, Russia, China, Japan, Kazakhstan and the US are competing at this market. Ukraine is big country with a huge potential and I am sure we can rank among the world’s top three titanium market players,” explained Mr. Firtash.
Group DF’s experts estimate that the past decade saw a 3-time growth of the titanium sponge market. In 2012, the global sponge output is expected to reach 220-230 thousand tons a year. Alongside this, Ukraine’s market share in the past ten years shrank from 9.5 down to 5 percent.
Commenting on the deal, Mr. Boris Krasnyansky, CEO of Group DF, noted that ZTMC organically fits into Group DF’s titanium business: “This is another logical and essential step towards building a vertically integrated titanium business of the Group. By investing in ZTMC, Group DF is entering the metallic titanium production market. It is a critical part of the Group’s strategy aimed at putting in place a complete production chain: from titanium mining and all the way to end products manufacturing. Such a holding is the only way for Ukraine to regain the once strong positions in international titanium products markets.”
Zaporozhye Titanium & Magnesium Combine is the only titanium sponge production enterprise in Ukraine and across the whole of Europe. Having an installed capacity of 20 thousand tons, the plant at the moment is producing the most of 10 thousand tons of titanium sponge a year. This is caused by outdated production technologies and a too high electric energy share in the product’s cost (up to 40 %). On top of that, the arrears amassed at the enterprise carried a threat of its complete shutdown and the ultimate loss of Ukraine’s positions at international markets.
In the 7 years to come, Group DF is planning to invest about US$ 2.5 billion in the development of its titanium business in which Zaporozhye Titanium & Magnesium Combine is to become an integral part. Extensive modernization and construction of new titanium sponge production facilities are expected to commence in 2013.
Earlier on December 13, one of Group DF’s subsidiaries won the tender run by the State Property Fund of Ukraine with an eye on engaging non-public participants in the limited liability company Zaporozhye Titanium & Magnesium Combine. According to the appraisal completed by a Kiev-based firm ‘Markus Bureau’ which had been selected by the SPF as the company’s assessor, the cost of the ZTMC integral property complex was 716.9 million UAH. Group DF offered US$ 110 million for a 49% stake in the company’s equity. Group DF estimates that the total value of this asset including the electric bills liabilities and repayment of the arrears owed to the Pension Fund of Ukraine, will be at least US$ 160 million.
Zaporozhye Titanium & Magnesium Combine LLC (ZTMC) is to be founded pursuant to Resolution #955 of the Cabinet of Ministers of Ukraine of 3 October 2012 seeking to raise investments in the company. The integral property complex of the public enterprise ZTMC is to be contributed into the authorized fund of the ZTMC Limited Liability Company. 51% stake in the company’s equity is to be retained by the government while 49% of shares are to be acquired by Group DF through its affiliated entity.