Carlyle Group Settles with Novolipetsk

US private equity investor Carlyle has agreed to accept US$234m from Russian steel maker Novolipetsk in compensation for the latter’s aborted US$3.5bn acquisition of portfolio company John Maneely.

Originally the Russian group agreed to purchase the US steel producer last August, after agreeing a loan of US$2bn to finance the acquisition. However, in November Novolipetsk pulled out of the agreement.

The Carlyle consortium, through John Maneely’s parent company, then filed a lawsuit in a US District Court seeking damages for the breach of the takeover agreement and an order to compel Novolipetsk to “fulfil its obligations under the merger agreement”.

The Russian group said it was “vigorously defending” itself against the action, and added that it believed its maximum liability might be US$529m, through a break clause specifying an overall cap on damages.

Now it has settled with Carlyle for half that amount. However, over the last six months the rouble has fallen steeply in value against the dollar, meaning Novolipetsk, which mainly earns roubles has suffered.

However, by saving the Maneely outlay, the company has so far avoided having to seek state funding. At the end of September, its net debt stood at US$3bn, lower than its recent market capitalisation of US$5.5bn. Only in July had Novolipetsk raised a US$1.6bn five-year facility in any case.

The company’s legal advisers were Debevoise & Plimpton.