Novolipetsk Steel to acquire John Maneely Company from The Carlyle Group for $3.53 billion

LSE-listed Russian steel producer Novolipetsk Steel has signed a definitive agreement to acquire US steel pipe and tube manufacturer John Maneely Company (JMC) from private equity firm The Carlyle Group and the Zekelman family for $3.53 billion, acquiring the company on a debt-free, cash-free basis. The transaction is subject to customary regulatory approvals and is expected to close in the fourth quarter of 2008.

JMC is the largest independent tubular manufacturer in North America, with the most diverse product platform in the North American pipe and tube industry. Through its Wheatland and Atlas Tube divisions, it is the market leader in North America in each of its three core product categories -- hollow structural sections (HSS), standard pipe and electrical conduit.

During Carlyle's ownership, sales increased by $800 million, a 3 per cent rise, from $2.2 billion in fiscal 2006 to an estimated $3 billion in fiscal 2008.

Formed through the combination of John Maneely Company and Atlas Tube in December 2006 and headquartered in Beachwood, Ohio, JMC operates eleven plants in five U.S. states and one Canadian province and has a total production capacity of more than 3 million tons of steel pipe and tube per annum. In the twelve months ended June 30, 2008, JMC shipped 2.1 million tons of pipe and generated revenue of $2.4 billion and EBITDA of $485 million.

The acquisition of JMC fits with NLMK's stated strategy of portfolio diversification and downstream integration in the core markets of the company. It strengthens NLMK's position in North America and provides an entry point into an important and high margin end market.

NLMK, through its joint venture with Duferco Group, has two manufacturing facilities in the US, Duferco Farrell Corp and Sharon Coating, LLC.

Duferco Farrell is currently the key supplier of hot rolled coils (HRC) to JMC and in particular the largest supplier of HRC to JMC's Wheatland division, to which it is closely located. NLMK is therefore in an excellent position to extract synergies (estimated to be around $35 million per annum) from the vertical integration of its steel assets in North America with JMC's low-cost processing capabilities.

Vladimir Lisin, chairman of NLMK, said, ''We are delighted to have secured an entry into the highly attractive US pipe and tube market and we are confident that the incorporation of JMC's quality assets into the NLMK group will prove to be a highly attractive investment for NLMK's shareholders as well as a beneficial development for JMC's customers and employees.''