Russian steelmaker dashes $3.5bn Carlyle exit

Novolidetsk Steel has terminated its agreement to purchase steel pipe maker and Carlyle portfolio company John Maneely Company. Carlyle filed suit against Novolidetsk on 15 October and continues to pursue legal action.

Publicly listed Russian steel company Novolidetsk Steel has terminated its purchase agreement to acquire The Carlyle Group portfolio company John Maneely for $3.5 billion.

On 15 October, Carlyle unit DBO holdings filed a lawsuit in US District Court in Manhattan for failure to complete the transaction in a timely manner thus breaching the agreement. The purchase agreement had remained in place until the recent termination as the parties negotiated.

The lawsuit remains pending.

Novolidetsk, 85 percent of which is owned by Vladmir Lisin, the 21st richest man in the world, failed to close the merger on two separate deadlines despite having the necessary financing.

Novolidetsk on 12 August agreed to acquire John Maneely on a “debt-free, cash-free basis” following a competitive bidding process. After failing to close on 29 September as contractually required, the companies agreed on a new deadline of 15 October.

The Russian company sought to renegotiate a reduced purchase price or restructure the merger agreement despite binding agreements from lenders to provide financing for the transaction.

“Through its deceptive and unlawful actions, [Novolidetsk] has breached the merger agreement, violated the implied covenant of good faith and fair dealing, and has damaged the company,” DBO Holdings said in court filings.

Novolidetsk said “there have been disagreements concerning the rights and obligations of the parties under the merger agreement”. The company has retained US legal counsel and “intends to vigourously defend itself against the claims”.

Washington, DC-based Carlyle purchased steel pipe manufacturer John Maneely in March 2006 for $568 million. John Maneely operates 11 plants in five US states and one Canadian province and has a total production capacity of more than 3 million tonnes of steel pipe and tube per year.