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May 21, 2004

OMZ (Uralmash-Izhora Group) divests OMZ-Onshore&Offshore

OMZ (Uralmash-Izhora Group) will divest its subsidiary company, OMZ Onshore&Offshore. The sale of OMZ Onshore&Offshore will be conducted within the framework of the new strategy of OMZ approved at the last Board meeting on April 6 which calls for a clear focus of the Company on the power generation equipment market and the divestiture of non-core assets.

In April this year OMZ acquired Skoda JS and the consortium Skoda Steel – Hute and Kovarny, which will result in increased sales of power generation equipment and specialty steel. OMZ’s management decided to divest OMZ Onshore&Offshore which manages the Company’s shipbuilding and oil drilling equipment business in order to finance the Company’s expansion into the power generation equipment business.

According to the corporate rules for divestiture of non-core businesses adopted by the Board, OMZ Onshore&Offshore will be divested under a management buyout scheme whereby more than forty company managers will participate in the scheme.

The sale of OMZ Onshore&Offshore will be executed in several stages. Management individually will acquire 85% of the company. During the first stage this share will be acquired by seven top managers of OMZ: Michael Aivazov, Vladimir Andriyashin, Leonid Grabovetz, Nikolay Zharkov, Michael Kossolapov, Sergey Lipsky and Sergey Nikolaev. More than 40 employees of OMZ Onshore&Offshore will participate in the buyout at a later stage. The acquired shares will be paid for in three installments within two months. The first installment will amount to 10% of the total price to be paid.

OMZ Onshore&Offshore was valued at 1.45 billion rubles by an independent valuation consultancy. The valuation was approved by the Board of Directors of OMZ. The acquiring parties will assume debt of approximately US$70 million dollars, which will decrease OMZ’s consolidated debt position by that amount.

Commenting on the sale Mr. Yakovlev, CEO of OMZ, said: “A management buyout is the best option for the divestiture of OMZ Onshore&Offshore today as it allows us to finance the acquisition of the Skoda assets. We do not want to lose the momentum of developing the Company according to our vision. Management agreed to acquire OMZ Onshore&Offshore on acceptable terms and in line with the current business valuation, therefore we decided to go ahead with the deal”.




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