TIDMEVR
RNS Number : 6555V
Evraz Plc
15 April 2021
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
15 April 2021
EVRAZ plc ("EVRAZ" or the "Company") - Update on the potential
demerger of coal assets (the "Potential Demerger")
Further to the Company's announcement on 26 January 2021 that it
is considering the strategic merits of and possible structures for
a potential demerger of its coal business, the Board of EVRAZ (the
"Board") has today given its approval for the Company to move
forward in its preparations for the Potential Demerger. There can
be no assurance that the Potential Demerger will be undertaken and
the Board will keep shareholders updated through further
announcements as appropriate.
Following completion of the previously announced consolidation,
essentially all of the Company's coal assets sit under PJSC
Raspadskaya ("Raspadskaya"). Raspadskaya is a subsidiary of EVRAZ
listed on the Moscow Exchange, and is an integrated group of coal
mining and enrichment facilities located in the Kemerovo region and
Tyva Republic of Russia. It comprises eight underground mines, two
open-pit operations and three processing facilities. Raspadskaya
has a market capitalisation of c. RUB137bn (c.US$1.8bn) as of 15
April 2021. For the year ended 31 December 2020, coal segment
contributed approximately US$400 million into EVRAZ's total EBITDA
of US$2,212 million (18%).
Potential Demerger rationale
EVRAZ is committed to maximising value for its shareholders and
the Board believes the Potential Demerger of Raspadskaya could
create significant long-term value by allowing each business to
pursue dedicated strategic, capital allocation and ESG objectives.
In particular, the rationale behind the Potential Demerger
includes:
-- Differentiated value proposition: Establish a clear and
focused equity story for each of EVRAZ as a leading global producer
of steel, iron ore & vanadium and Raspadskaya as a leading
regional producer of high quality metallurgical coal
-- Increased transparency over sustainability performance and
goals: Allow each business to concentrate on its respective ESG
priorities, enhancing accountability of ESG achievements and
comparability of results against peer universe
-- Optionality for investors: Flexibility to customise the
exposure to respective sectors, earnings volatility profiles and
ESG performance in accordance with investors' risk and return
appetite via publicly listed instruments
-- Tailored capital allocation: Enable each business to adopt a
capital allocation framework balancing its cash flow fluctuations,
growth investment strategy and return of capital to
shareholders
-- Independent growth strategy for Raspadskaya: Allow
Raspadskaya to independently implement its strategy and pursue
organic and inorganic growth opportunities avoiding possible
competition for internal financial and human resources
Potential Demerger process overview and preparatory steps
The Company notes that the current intention is for the
Potential Demerger, if undertaken, to be effected by EVRAZ making
an interim in specie distribution of all of the shares which EVRAZ
directly holds in Raspadskaya, being approximately 90.9% of the
total shares[1], to all shareholders of EVRAZ pro rata to their
existing shareholdings in EVRAZ (the "Demerger Dividend"). The
Company intends for a mechanism to be made available to EVRAZ
shareholders, providing them with the opportunity to sell, for
cash, the shares in Raspadskaya which they would be entitled to
receive pursuant to the Demerger Dividend. It is the Company's
intention that such mechanism will not be dependent on funding from
the post-demerger EVRAZ group or its major shareholders.
Certain financing arrangements are intended to be put in place
and/or completed prior to the Potential Demerger being effected in
order to rebalance the capital structure of EVRAZ and Raspadskaya.
If the Potential Demerger is implemented, EVRAZ intends to remain
committed to its existing financial policies, in particular to
continue to target Net Debt/EBITDA below 2.0x through the
cycle.
On completion of the Potential Demerger, EVRAZ plans to continue
to satisfy part of its coal requirements for its production,
through purchases of coal on arm's length terms from Raspadskaya.
EVRAZ currently intends that its trading subsidiary, East Metals
AG, will continue to re-sell coal purchased from Raspadskaya,
applying arm's length margins.
In the event that the Board decides to proceed with the
Potential Demerger, the precise mechanics and timing of the
Potential Demerger will be communicated to shareholders in due
course. Regardless of whether the Potential Demerger is undertaken,
it is intended that Raspadskaya will continue to be listed on the
Moscow Exchange and EVRAZ will continue to be listed on the Premium
Segment of the London Stock Exchange.
EVRAZ has engaged J.P. Morgan Securities plc (which conducts its
UK investment banking activities as J.P. Morgan Cazenove) and
Citigroup Global Markets Limited as financial advisors, and
Linklaters LLP as legal advisor to assist with the ongoing review
of, and preparation for, the Potential Demerger.
About the Company
EVRAZ is a vertically integrated steel, mining and vanadium
business with operations in the Russian Federation, the USA,
Canada, the Czech Republic and Kazakhstan. EVRAZ is among the top
steel producers in the world. A significant portion of the ompany's
internal consumption of iron ore and coking coal is covered by its
mining operations. EVRAZ is listed on the London Stock Exchange and
is a constituent of the FTSE 100 index.
For further information:
EVRAZ plc IR Contacts Tel: +44 207 290 1095
Important information
Each of J.P. Morgan Securities plc (which conducts its UK
investment banking activities as J.P. Morgan Cazenove) and
Citigroup Global Markets Limited, is authorised by the Prudential
Regulation Authority and regulated in the United Kingdom by both
the Prudential Regulation Authority and the Financial Conduct
Authority, is acting exclusively for the Company and no one else in
connection with the Potential Demerger. They will not regard any
other person as a client in relation to the Potential Demerger and
will not be responsible to anyone other than the Company for
providing the protections afforded to their respective clients or
for giving advice in relation to the Potential Demerger or the
contents of this announcement or any transaction, arrangement or
other matter referred to herein.
[1] The total number of shares used to calculate this percentage
includes treasury shares
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END
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