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Carlyle nets $234m from Maneely break-up

Russian steelmaker Novolipetsk Steel will pay the buyout firm less than half the maximum possible damages for withdrawing from the $3.53bn acquisition of John Maneely, a deal struck last August.

The Carlyle Group will receive a settlement of $234 million from Novolipetsk Steel – or NLMK – after the Russian steel producer pulled out of a $3.53 billion deal to acquire Carlyle’s steel pipe and tube manufacturer John Maneely Company (JMC).

NLMK is based in Lipetsk, Russia, and listed on the London Stock Exchange. It agreed to buy JMC from a shareholder group including global private equity firm the Carlyle Group and the Zekelman family in August last year.

JMC: no deal

The deal was terminated by NLMK in November and Carlyle subsequently filed a lawsuit. The settlement agreed yesterday, which is to be paid within the next three days, is less than half of the maximum possible damages, which were capped at $529 million, according to NLMK’s December results statement.

Carlyle acquired New Jersey-based JMC in 2006 for roughly $500 million, investing from its $7.85 billion buyout vehicle Carlyle Partners IV. That same year, the Washington DC-based firm merged JMC with Ontario, Canada-based steel tube specialist Atlas Tube in a deal valued at approximately $1.5 billion.

Carlyle said that during its ownership of the business, JMC sales have increased 36 percent, from $2.2 billion in 2006 to $3 billion in 2008.

A spokesman for Carlyle said the firm was pleased to have settled the dispute.

It is one of many collapsed deals above the $1 billion mark that have become court battles. In December, a seven-month legal battle concluded between US buyout firm Apollo Global Management and chemicals group Huntsman, after Apollo’s Hexion Speciality Chemicals backed out of its $10.6 billion deal to buy Huntsman. Huntsman’s shareholders walked away with $1 billion in break-up fees.

In Canada, telecoms giant BCE is currently litigating against a consortium of financial buyers that includes Ontario Teachers’ Pension Plan, Providence Equity Partners and Madison Dearborn. The group cancelled a record-setting C$52 billion (€32 billion; $40 billion) buyout after auditor KPMG determined the company would emerge insolvent from the buyout.