Russia’s state-owned Vneshekonombank has recently agreed to buy Industrialny Soyuz Donbassa (ISD) holding. The terms of the deal forged at the end of December 2009 are to be kept confidential until presidential elections take place in Ukraine on 17 January, because information about the transaction are prone to influence chance of winning for the Russian-friendly candidates. The purchase price, though is already in the open: one billion US dollars.

The deal was struck by Russian President Vladimir Putin himself, who is also Chairman of Vneshekonombank’s Supervisory Board. The agreement was made with the concern’s actual owners, Vitali Gaiduk, Sergei Taruta and Oleg Mkrtchian, who hold a 20%, 40% and 40% stakes in the company, respectively.

Under the unexpected deal, about which there has been no media speculation at all, the biggest metallurgical works of Hungary, Poland and Ukraine have been placed in Russian hands. As of now, Hungary’s Dunaferr in Dunaújváros, Poland’s Huta Czestochowa, as well as the works in Dnepropetrovsk and Alchevsk in Ukraine are owned by Vneshekonombank.

The owners of ISD had no choice but to sell their holding due to massive debts accumulated at foreign banks, including Vneshekonombank itself. This way they have managed to stay clear of bankruptcy that seemed unavoidable.

ISD was doomed to bust because two of its owners, Taruta and Mkrtchian were struggling with serious financial issues and Gaiduk had announced two years ago, i.e. before the crisis hit, that he would part with his stake. At that time he had agreed with the co-owners to sell half of his 20% package for a mesmerising USD 1 billion. Although the deal fell through due to the group’s financial woes, Gaiduk did receive some money for his 10% stake he never gave up and by that time he already invested this "windfall" into other projects. Under these circumstances the Russian bank did not have to break a sweat to put its hands on the holding.

Formally, Vneshekonombank acquired a 51% package in the concern and pledged to keep Mkrtchian in the CEO’s seat until the end of 2010 when it will officially have the remaining 49% stake, as well. It will be probably then when the top brass of ISD, which Moscow considers a group of dilettantes, will be replaced.

The purchase price will be transferred as the shares are handed over, with USD 500 m due to be wired already in the first days of 2010. The bulk of the proceeds will be used for debt repayment.

From portfolio.hu, January 6th 2010