Ukraine sets auction for UMCC for Oct 9, terms call for investing $10 mln

MOSCOW. July 16 (Interfax) - Ukraine's State Property Fund scheduled the auction for 100% of shares in UMCC Titanium, a miner and processor of titanium raw material, for October 9 on Monday.

"The maximum possible period for holding the auction was set for UMCC, which will enable potential buyers, including foreign ones, to do full-fledged, independent due diligence of the company," Ukrainian media reported the fund as saying in a press release.

The fund also scheduled the auction for the assets of state company Ukraine Hotel for September 18.

The starting price will be UAH3.899 billion for UMCC and UAH1.048 billion for Ukraine Hotel. The auctions will be held in Ukraine's electronic public purchasing system Prozorro. The government stipulated the terms of the privatization in an order issued on July 12.

The buyer of UMCC will have to carry out capital expenditures in equipment updates and modernization of at least UAH50 million annually until they reach UAH400 million (about $9.76 million at the current rate).

The buyer must also reimburse the Property Fund for paying for the services of advisor BDO Corporate Finance LLC in the amount of UAH12.26 with 45 calendar days of the transfer of ownership rights, as well as the variable portion of its compensation in the amount of 1% of the selling price of the shares.

UMCC's new owner will be obligated to develop a plan to shut down and reclamation of the sludge dump in Morgunka gully, as well as reconstruct existing sewage treatment facilities at the company's Volnogorsk Mining and Metallurgical Plant in 2025-2027.

Other conditions include paying dividends to the state budget on results for 2024 and the period until ownership is transferred in 2025, repaying any debts on wages and to the government within six months and paying off overdue payables.

The Ukrainian government approved the conditions and starting price for the privatization of UMCC on July 12. The auction will offer all 1.944 billion shares in the company, amounting to 100% of its equity.

The government put UMCC on the list of companies slated for privatization in 2017 back in August 2016, but the sale was put off several times. The Property Fund tried unsuccessfully to sell UMCC twice in the second half of 2021, because both times there were an insufficient number of correctly submitted bids.

BDP Corporate Finance said the auctions failed because the government refused to provide guarantees of protection for major investments to foreign investors, who refused to bid in such circumstances, although they were interested in the company. BDO and the Property Fund drafted a government order on guarantees that would cover risks of UMCC's past activities, and a memorandum of understanding on protection of major investments that is supposed to be signed between the auction winner and the government. The European Bank for Reconstruction and Development then confirmed its willingness to provide financing to reputable investors for the development of UMCC after the auction.

UMCC previously sold its products to more than 30 countries. Its main markets were the European Union, China, Turkey, the United States and countries in Africa. UMCC resumed shipping ilmenite concentrate to the European market last fall.

The official exchange rate was UAH41.04/$1 on July 15.