China’s Hebei Iron and Steel Group (HBIS) has submitted the only valid binding bid for the acquisition of Serbia’s Zelezara Smederevo, the country’s sole steel mill and its second-largest exporter, Serbian minister of economy Zeljko Sertic confirmed to state broadcaster Radio-televizija Srbije (RTS) on April 2. The financial part of the bid will be opened on April 5.
HBIS’s proposal has been expected by Serbian officials since the Chinese company signed a memorandum of understanding with Zelezara Smederevo in November 2015. Prime minister Aleksandar Vucic said at the time that the memorandum was a step towards the Chinese company’s takeover of the mill, which employs 5,000 people and is the main employer in the town of Smederevo near Belgrade.
According to Sertic, the price cannot be lower than €45.7mn, which is a dealbreaker, while other elements, such how many of the workforce will be kept on, will be subject to negotiations.
The Serbian economy ministry launched a tender process for the sale of Zelezara Smederevo on March 4, setting the starting price at just €45.7mn. HBIS’s bid was opened at the economy ministry on April 1.
“I believe that the whole takeover process will be done in April,” Seric said.
Sertic added that he was optimistic that no "plan B" would be required for the mill at this time, despite recent developments in the global steel industry.
“In Great Britain, a few thousand jobs in steel production are being killed and we are having talks and even a binding bid from the company which is the second on the global steel market,” according to the minister.
Zelezara was sold to United States Steel Corporation (US Steel) for $33mn in 2003, but was bought back by the state in 2012 for a token price of $1. A re-privatisation attempt by US-based Esmark fell through in February 2015.
Netherlands-based HPK Engineering took over Zelezara's management in March 2015, pledging to boost production and make it profitable within six months, aided by $20mn of investments in raw materials. The new management has also been preparing the company for a privatisation attempt in 2016.
In October 2015, work restarted at the second blast furnace, four years after US Steel shut it down in late 2011.
The company was affected by devastating floods in May 2014 as well as changes to its ownership structure. In 2015 its exports were 58.8% higher in annual terms and amounted to €319mn. Zelezara Smederevo returned to the position of Serbia's second largest exporter in February 2016 with exports valued at €18.4mn, after it fell to third place in January, finance ministry data show.
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