Ruukki Group (LON:RKKI) has unveiled plans to consolidate ownership of its speciality alloys operations in a €25.3 million deal with 28.49 per cent shareholder Kermas.
Ruukki will pay €17.3 million to acquire German ferrochrome-maker Elektrowerk-Weisweiler and a further €8 million to end an agreement to share the profits and losses of chromite miner Türk Maadin Sirketi and trading unit RCS.
When Kermas took the strategic stake in Ruukki in 2008, it brought the three businesses with it.
While Ruukki took ownership of the Turkish mining operation and the Malta-based trading business, it felt more comfortable entering an exclusive ten-year agreement with EWW.
It meant EWW produced its ferrochrome products only for Ruukki while remaining under Kermas ownership.
"Over the past four years Ruukki has been strengthening its understanding and management of the speciality alloys operations and it is no longer necessary to have Kermas' involvement,” chief executive Thomas Hoyer told Proactive Investors.
The deal also provides certainty and transparency for investors and of course Ruukki itself.
“I do not want to have the risk of people wondering what will happen in six years (when the tolling agreement would have run out),” Hoyer added.
“While Kermas’ large stake in our company forms a natural hedge - what’s good for Ruukki is good for Kermas – who knows what happens to that stake in six years?
“A lot of things can happen in that time, so now it was important to draw a clear line between Ruukki’s and Kermas’s businesses and show that Ruukki controls and owns its key assets.”
The stellar performance of EWW was another important consideration, Hoyer revealed: “It is performing very, very well.
“We have a lot of demand for the product, we have long-term agreements, and it is a good platform for growth.
“We could increase production. We could also develop other products. And now that it’s ours, we can make those decisions.
“In a time where most ferrochrome producers are struggling to make any profits, our speciality alloys business is constantly performing very well.
“It generated revenues of more than €80 million last year, and by far the largest contributors to that were products made at EWW.”
Currently, the largest market for its specialised products is the US, followed by Germany, and other customers dotted around the globe, in countries such as Italy, China, Australia and Japan.
At present, Ruukki’s speciality alloys are sold mainly to users in the developed world. Hoyer expects the demand in developing countries to rise strongly over time.
For now, he is concentrating on the Kermas transaction: “This German deal is fantastic for us, I am extremely pleased with it. It should make it easier for anyone external, be it an analyst or a private investor, to evaluate our company.
“Our assets are our own, and this is important, it clarifies things.”