Deutsche Bank, one of the largest European financial houses, has been selected to arrange the sale of a stake in eastern Slovak steelmaker VSŽ Kosice. The decision was taken on August 23 by a commission composed of VSŽ representatives and shareholders, and Slovak government officials.
According to VSŽ spokesman Jozef Marko, the commission selected Deutsche Bank from a dozen bidders interested in arranging a tender for the selection of a strategic investor for VSŽ. Deutsche Bank, according to Marko, won the tender thanks to its extensive experience in consulting activities in the restructuring and sale of steel companies.
Tax and financial consulting firm KPMG finished second in the tender.
Among the potential strategic partners for VSŽ are now the Indian Ispat Group, the Austrian Voest Alpine, the Dutch Hoogovens and the Swiss firm Diferco.
During July negotiations in London with VSŽ and Slovak government officials, US Steel had seemed to be the most probable strategic partner for the VSŽ. After months of due diligence at the steelmaker and an audit performed by Deloitte & Touche, the American firm still enjoyed a period of exclusivity that allowed it to bid first for VSŽ, the biggest Slovak company.
US Steel's bid was not accepted by the Slovak government, however. The Americans offered only $220 million for VSŽ, half of which was represented by investments it had already made into a US Steel-VSŽ joint venture in Košice.
"The US Steel bid was disappointing for all parties involved - for the government, shareholders and banks," said Martin Barto, senior strategist for state bank SLSP.
Deputy Prime Minister for Economy Ivan Mikloš said on August 23 that US Steel is now preparing a new bid, but that with the exclusivity period over, the search for a strategic investor had turned further afield.
Ths sale of any stake in VSŽ is conditional on the signing of a standstill agreement with the firm's creditors, principal among whom [because of VSŽ's massive tax arrears] is the Slovak government. VSŽ owed almost $500 million to 40 banks at the end of July 1999, while it recorded a first half loss of 2.4 billion crowns ($57 million) despite record sales.
VSŽ defaulted on a $35 million syndicated loan last November, and has since been trying to stabilise its finances and sell off its non-core properties. Its future is considered vital to the Slovak economy; not only does VSŽ employ almost 26,000 people at a time when unemployment has reached 19.2%, but in 1998 it accounted for 10% of Slovak exports and 7% of Slovak GDP.