MOSCOW, October 24 (RIA Novosti commentator Peter Lavelle). Mittal Steel's winning auction bid Monday for Ukraine's Krivorozhstal Steel, $4.79 billion for 93.02% of the company's shares, suggests the market undervalues Russian peers even after discounting the large premium for control.
Given the price Mittal Steel's bid, Krivorozhstal's implied total value stands at $5.2 billion and a larger capitalization of Russia's Severstal - which produces 13 million tons a year of (largely better quality) steel and needs much less capital expenditures in the near-term. Krivorozhstal's annual steel production stands at 7 million tons.
Investors took notice of this valuation differential and sent the stocks of Russian steel makers north: Severstal +2.7% at $8.47, Evraz +2.9% at $15.58, and Novolipetsk +7.1% at $1.35.