Russian Steelmaker Buys U.S. Unit

Carlyle Group, the world’s second-largest private-equity firm, sold U.S. steelmaker John Maneely Co. to Russia’s OAO Novolipetsk Steel for $3.5 billion, increasing its money sevenfold in two years.

The Zekelman family also sold its stake in John Maneely, which is forecast to have sales of $3 billion in fiscal 2008, Lipetsk-based Novolipetsk said in a statement. It’s the biggest steel industry takeover this year, according to data compiled by Bloomberg News.

Maneely owns Wheatland Tube Co., which has facilities in Wheatland and Sharon, both in Mercer County. Maneely, which combined with Canada’s Atlas Tube Inc. in December 2006, is based in Beachwood, Ohio, a Cleveland suburb.

Russian mills, including OAO Severstal, are expanding in the United States, where prices for steel coil used in construction and cars have doubled to $1,080 a metric ton from last year as producers pass on higher costs. Novolipetsk, controlled by billionaire Vladimir Lisin, 52, will gain North America’s biggest independent maker of steel tubes, used in plumbing, scaffolding and electrical wiring.

“Novolipetsk has plenty of cash and is looking to expand its production, like Severstal has done,” said Eugene Bulanov, an analyst at CentreInvest Securities in Moscow. “American industries are very attractive to Russian companies right now.”

Russia’s government is encouraging the creation of “global champions,” and rising domestic operating costs are prompting steelmakers to buy businesses overseas. Severstal, Russia’s biggest steelmaker, which this month completed the $775 million purchase of Esmark Inc., has said it may study large acquisitions in the United States.

Merrill Lynch & Co. is advising Novolipetsk, and JPMorgan Chase & Co., Goldman Sachs Group Inc. and GMP Securities LP are advising John Maneely.

Global steel prices have increased as developing economies such as China, India and Brazil build more bridges, roads and skyscrapers. Steelmakers are facing rising costs for the raw materials used to make their products. Iron-ore prices have soared for six years to a record, gaining as much as 97 percent this year, and coking-coal prices have more than doubled.

John Maneely, founded in 1877, was acquired by Carlyle, the buyout fund said in March 2006, without disclosing financial terms. The Wall Street Journal reported at the time that the deal would value the company at about $500 million.

In the year ended June 30, John Maneely shipped 2.1 million tons of pipe and had earnings before interest, tax, depreciation and amortization of $485 million, it said. The acquisition is priced at 7.3 times earnings.

Annual sales grew by about $800 million under Carlyle’s ownership, according to the statement. About 80 percent of revenue comes from plumbing and electrical applications used in non- residential construction markets.

Originally published by staff and wire reports.

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