Russia TMK, Interpipe in merger talks: sources
By Elif Kaban
MOSCOW (Reuters) - Russia's TMK, the world's third-largest steel pipe maker by market capitalization, is in merger talks with Ukraine's No.1 producer Interpipe, market sources close to the negotiations said on Tuesday.
TMK (TRMK.RTS)(TRMKq.L), which raised over $1 billion at a London listing last year, has annual revenues of over $3 billion and a market capitalization of just under $8 billion.
"The companies are in merger talks," said one market source.
"The process is moving on. There are active discussions about a merger," said another.
TMK officials were not immediately available for comment.
One investment banker following the sector said he expected a busy deal pipeline.
"Everybody is talking to everybody else in steel and mining. There are combinations of every shape and form under discussion," the banker said.
Another investment banker predicted "a lot of movement" in the pipe sector in Russia in the coming months. "We expect to see purchases and consolidation," he said.
TMK is Russia's leading supplier of steel pipes, which are in high demand from the country's oil and gas sector. The company is controlled by chairman Dmitry Pumpyansky.
Soaring oil prices and an oil and gas exploration boom has boosted demand for steel pipes globally, the reason why many analysts are bullish about TMK's prospects.
TMK accounts for 56 percent of Russia's steel pipe exports and supplies products to companies in over 60 countries. Its clients include Anglo-Dutch Royal Dutch/Shell (RDSa.L), France's Total (TOTF.PA) and Spain's Respol (REP.MC) as well as Russian majors LUKOIL (LKOH.MM), Rosneft (ROSN.MM) and TNK-BP (BP.L).
TMK's London IPO in October 2006 was more than 19 times oversubscribed, a record for any Russian listing. The offering valued the company at $4.7 billion.
Investors have not been disappointed. TMK's London-listed Global Depositary Receipts were trading up 0.82 percent on Tuesday at just under $37, well above the listing price of $21.60 in October 2006.
Market sources said a merger would be easier to sell politically "since nobody wants to be seen selling assets to another country."
Interpipe is controlled by tycoon Viktor Pinchuk, one of the country's richest men and the son-in-law of former president Leonid Kuchma.
According to Forbes magazine, Pinchuk is worth $1.3 billion.
Interpipe groups four pipe-production plants and other companies across Ukraine. It exports the bulk of its production. It produced 1.2 million tonnes of steel pipes in 2006.
Interpipe consists of seamless pipe maker Nizhnedneprovsky, Novomokovsk pipe plant, Nikopol pipe company, the Nikotube and Mogilevsky steelworks, and Nikopol ferro-alloys plant.
Interpipe General Director Oleksander Kirichko said last month his company was planning an initial public offering in the second half of 2008.
The company recently signed an agreement with Italian steel maker Danieli (DANI.MI) to build a steel production facility at Interpipe's Nizhnyodniprovsky Pipe Plant NITR.PFT.
Pinchuk has said this would be the first new steel plant built in Ukraine for 40 years and will become the largest arc-furnace plant in central and eastern Europe after its completion planned for 2009.
(Additional reporting by Robin Paxton)
