June 30, 2008

Ukrainian Billionaire Buys Out Spartan Steel Maker ; in Association With RBS

By Graeme King

A FAST-GROWING steel business in Gateshead has been bought out by the Ukraine's equivalent of Roman Abramovich.

Spartan UK, based in Dunston, is on a fast track growth programme which aims to deliver pounds 100m sales in two years' time - and now its success has attracted oligarch Rinat Akhmetov to take control.

Mr Akhmetov's Metinvest business generates a phenomenal 12% of the Ukraine's GDP, owns iron ore and coal mines as well as steel mills, and the boss is also president of Shakhtar Donetsk football club.

Spartan UK, with 105 staff, is set to benefit from Metinvest's scale and influence, and its access to raw materials at a time when global prices are soaring.

Managing director Ian Hardy said the price of coke for making steel had gone up by 200% compared to 2007, while iron ore has gone up by 65%, and 70% the year before.

The Spartan UK business was already successful before its recent change in ownership, using a fast turn around, premium priced business model to drive the company forward.

End users include the construction and power generation industries, with Spartan steel ending up in 'yellow goods' like excavators, towers for wind turbines, and even Arsenal FC's Emirates Stadium.

Sales have risen from pounds 37.7m in 2004, to pounds 68.7m in 2007, and Mr Hardy expects to hit at least pounds 85m this year and then pounds 100m by 2010.

Mr Hardy said: "In steel, it's the Russians and the Ukrainians that have the money at the moment.

"It's partly about raw materials - they have got coal and iron ore for steel making.

"They are sitting on these resources in the ground, and on the back of that, they can raise finance to be acquisitive.

"Five years ago, there were eight or nine steel-rolling businesses in Europe.

Since then, DanSteel in Denmark has been bought out by Novolipetsk (NLMK), Palini and Bertoli in Italy was bought by (Abramovich's company) EVRAZ, and Lucchini in Italy was bought by Severstal - all Russian businesses.

Mr Hardy added: "Rinat Akhmetov is a young, rich man in the mould of Roman Abramovich.

"He bought denationalised mines, where the shares were given to the people, and he then bought them up.

"We are now part of a very big, solid mining and metals company. We don't buy all our raw materials from our own group, but they are there if we want them, which provides a good, solid base for the business."

So how does the Akhmetov regime compare with Spartan UK's previous owners, the Malacalza family from Italy?

He said: "While I'm achieving what I said I would achieve, nobody asks a question. They leave me alone.

"I hope to be nearly 30% up on turnover and profit this year. We are now half way through and in line for that.

"We are spending the money to do it - we are stopping for the whole month of August to install new equipment.

"We are spending pounds 20m over the next three years, with pounds 6m this year."

"In steel, it's the Russians and the Ukrainians that have the money at the moment

THE MAN BEHIND THE MONEY

RINAT Leonidovych Akhmetov, 41, is a Ukrainian businessman who has become a multi-billionaire through his SCM (System Capital Management) Holdings business, which trades as Metinvest.

The company produces steel, but also boasts significant mining assets so can provide its own coke and iron ore for steel production.

Mr Akhmetov, pictured, is also president of Ukrainian football club, Shakhtar Donetsk, which has played in the UEFA Champions League in recent seasons. As well as his substantial business interests, which are said to generate 12% of Ukrainian GDP, Mr Akhmetov is also active in public life in the Ukraine. He is credited with founding an organisation called The Foundation for Effective Governance intended to support the economic development of the country.

Sources: Forbes magazine, and Wikipedia.

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