Russia's Novolipetsk Steel backs out of John Maneely deal; faces law suit

17 November 2008

Russian steelmaker Novolipetsk Steel (NLMK) has backed out of a $3.5 billion deal to acquire John Maneely Company (JMC) from private equity firm Carlyle, forcing DBO Holdings, the corporate parent of JMC, to file a law suit against NLMK in a New York federal court.

NLMK had, on 12 August, agreed to acquire its US rival John Maneely Company, North America's largest manufacturer of steel tubes, used in plumbing, scaffolding and electrical wiring, for $3.5 billion through bank commitments and a $2 billion bridge loan provided to NLMK by Merrill Lynch, Deutsche Bank and Societe Generale. The acquisition was to be closed by 29 September.

NLMK, owned by Russian tycoon Vladimir Lisin, did not make the termination public nor did it inform JMC, but the Carlyle Group learned about it from a legal document it had filed.

''We are disappointed that NLMK has chosen to breach its obligations under the merger agreement. However, JMC is an exceptional company with superb employees and a proven management team. We see many opportunities to continue building and strengthening the business," Daniel Pryor, managing director of Carlyle and vice chairman of John Maneely, said in a statement.

Media reports quoting inside sources at NLMK said the Russian steel maker wanted to renegotiate the terms of the deal in the light of the current global economic crisis and the slump in the steel market - both in the raw materials as well as the finished product.

NLMK, Russia's fourth largest steel maker, announced yesterday that it will be idling two blast furnaces with a combined capacity of 2.5 million tonnes a year.