EVRAZ offloads stake in Nakhodka Port for $354m

EVRAZ announced on Wednesday that it signed an agreement to dispose of the entire issued share capital of its fully-owned subsidiary joint stock company EVRAZ Nakhodka Trade Sea Port to its majority shareholder Lanebrook for consideration of $354.4m.

The FTSE 250 firm said that, as part of the transaction, the company and Nakhodka Port also entered into a transhipment agreement, pursuant to which EVRAZ agreed to supply and Nakhodka Port agreed to tranship cargoes of coal and metals in specified volumes and at specified tariffs for a period of five years.

Its board said the “financially and strategically attractive” transaction would enable EVRAZ to further optimise its asset portfolio and focus on its core business by divesting a non-core asset and realising value for it today.

The consideration of $354.4m - which comprised of $339.7m in respect of the sale of the shares of Nakhodka Port, the repayment of debt net of working capital adjustments and the payment of dividends from the Nakhodka Port to the group - would generate $295m of net proceeds for EVRAZ after deductions of applicable taxes, transaction fees and other related costs.

Those transaction proceeds would principally be applied to reduce the outstanding indebtedness of the company, thereby improving its overall financial position by reducing leverage.

The board said the transaction removed the medium-term risks to EVRAZ of owning a stevedoring company, including the market risks associated with the potential oversupply of stevedoring capacities in the Far East of Russia as a result of new projects being implemented over the next several years as announced by several industry players, the costs of ensuring compliance with environmental requirements, and the exposure to potential capital expenditure costs to upgrade Nakhodka Port's equipment.

It added that the Transhipment Agreement secured the continuity of transhipment services provided by the Nakhodka Port to EVRAZ for the next five years.

Completion of the transaction was expected to occur by 15 June.

“The independent directors of EVRAZ unanimously believe the strategic rationale for the disposal of the Nakhodka Port is compelling, allowing for the realisation of value for the port now, whilst at the same time securing transhipment capacity for the company for the next five years,” said senior independent non-executive director Sir Michael Peat.

“The independent directors believe this transaction will be financially beneficial to EVRAZ, enabling the company to continue making further progress with its focus on reducing indebtedness.”