Roman Abramovich, the billionaire owner of Chelsea football club, was locked in negotiations last night over taking a stake of up to 40 per cent in Russia's biggest steel maker, Evraz Group, for more than £1.5bn.
The move would mark Mr Abramovich's return to the Russian business arena, which he is thought to have largely abandoned after last year's £7bn sale of his Sibneft oil company to the state-owned Gazprom. It also follows last week's decision by the Luxembourg-based Arcelor to create the world's biggest steel maker through a merger with Russia's Severstal.
An Evraz spokesman confirmed that the group's controlling shareholders, Alexander Abramov and Alexander Frolov, were in talks with Mr Abramovich to sell a stake in the company. However, he stressed that there was no guarantee that a deal would be done.
Analysts predicted that the arrival of Mr Abramovich on Evraz's shareholder register could trigger the next phase in the consolidation of the global steel sector. They suggested that Mr Abramovich would use Evraz as a platform to first consolidate the Russian steel industry, which, like the global sector, is highly fragmented, before possibly turning his attentions abroad.
Russian steel makers are enjoying record profitability thanks to a construction boom sparked by the Kremlin's drive to rebuild the country's infrastructure. Evraz, which last year had its shares listed in London in the form of Global Depository Receipts, is the country's most profitable steel company. Mr Abramov and Mr Frolov jointly own 87 per cent of the company.
Mr Abramov, 47, is Russia's 13th richest man with a fortune estimated at £1.2bn by Forbes magazine. He alone controls over 50 per cent of Evraz. But his wealth pales into insignificance when compared with that of Mr Abramovich, who is rated the world's 11th wealthiest man according to Forbes with a fortune of nearly £10bn. Following his sale of Sibneft, he is thought to hold most of his wealth in cash, making him the ideal buyer for Evraz. Mr Abramovich is also no stranger to Russia's metals business. He held a 50 per cent stake in the aluminium giant Rusal until 2004 when he sold it to Oleg Deripaska, a fellow billionaire.
Some analysts were surprised by the news of the Chelsea owner's possible return to the Russian business arena given his rush to liquidate assets in the country just one year ago.
However, Eric Kraus, who manages the Nikitsky Russia Fund, said Evraz is a top quality asset which, thanks to its significant coal and iron ore assets, is highly efficient. Mr Kraus said: "There only a few parts of the world where Mr Abramovich can hope for annual returns of 20 to 30 per cent on his capital outside Russia. Maybe China or Brazil but he has no experience there."
The fund manager added: "From a personal point of view, Mr Abramovich probably misses the game that is Russian big business and watching Chelsea is no substitute."Reuse content