Commercial Metals Company, headquartered in Irving, Texas, announced that its Swiss subsidiary, Commercial Metals International AG (CMI), has submitted a bid to acquire 'Zeljezara Split' d.d. Kastel Sucurac (Split) from the Croatian Privatization Fund.
Split is an electric arc furnace steel reinforcing bar mill with a wire mesh facility. This is the second of Croatia's two operating steel mills for which Commercial Metals International AG has submitted a purchase offer. In February, Commercial Metals Company announced that CMI had submitted a bid for the Valjaonica Cijevi Sisak (Sisak) pipe mill. All bids for the Sisak mill were subsequently rejected by the Fund which has requested new bids for Sisak due by April 17, 2007. CMC is studying the tender request for Sisak and intends to have CMI submit a bid on or before April 17 for that facility. Both of these privatization efforts are in preparation for Croatia's anticipated membership in the European Union in 2009.
CMI is apparently one of six bidders who submitted bids in connection with the proposed privatization of Split. Split has approximately 170,000 metric tons of rebar capacity along with 30,000 tons of mesh capacity. Sisak has currently approximately 70,000 metric tons melting capacity and about 300,000 metric tons of tubular manufacturing capacity in its existing product line which include seamless, welded and cold processed pipe. CMI's bid for Split, which includes the share purchase price, assumption of a portion of the debt due to or guaranteed by the Croatian government as well as the assumption of trade payables, is approximately 155.7 million Croatian kuna ( $28 million). This amount does not include additional working capital requirements for increasing the production levels. The bid is subject to execution of a definitive purchase contract. In addition to continuing the existing operations at the Split mill, CMI contemplates future expansions including capital expenditures and working capital increase of at least 300 million Croatian kuna ($54 million). The existing level of the employee work force, less normal retirements or other natural attrition, will be retained for a minimum of three years under the terms of an agreement CMI has already reached with the trade union representing employees at the facility.
Hanns Zoellner, President of CMC's Marketing and Distribution segment, stated, „We are very excited about the prospects for Split and look forward to promptly commencing discussions with the Fund to conclude a purchase contract. We know the rebar business as CMC is the 3rd largest manufacturer in the United States and with the experience and success we have enjoyed following the acquisition of a majority interest in CMC Zawiercie, our Polish mill, we are confident we can achieve the same results in Croatia at Split. Even more exciting is the possibility that CMC will also acquire the Sisak mill. CMC's marketing group annually markets close to 500,000 metric tons of tubular products globally and has previously sold pipe products produced by Sisak. If our efforts to acquire both Croatian mills are successful, we can see significant synergies in their operations. Our worldwide marketing capability in both product lines should improve results at both facilities. „These moves fit our strategy to expand production capability in the key markets of Central and Eastern Europe. The acquisition of Split and Sisak would definitely fit with CMC's strategic objectives.” (azom.com)