Реферат: International company Middlesex

Introduction

MiddleSex Holdings is a diversified internationalcompany, operating in primary industries (steel, non-ferrous metals andenergy), financial service and agriculture. Additionally, the company has tradeinvestment in gold and insurance businesses. It is principally engaged in theemerging economies of the Commonwealth of Independent States (CIS) and CentralAsian republics.

The History and Profile of MiddleSex plc.

MiddleSex was founded in 1984, andoriginally was a small Welsh goldmining company called Ferromet that Mainlycould be described as defunct company with a loss about 12m by the year 1991.At that stage, the shares of the company were about .25p in the in the wake ofthe disastrous career. Then in 1992 PhilEdmonds, the former English cricketer, bought this company and renamed it afterat his countryside. But the company didn’t involve into its present shape until1993, when Masoud Alikhani joined the board and reversed his Russian businessesinto the company. Since then, MiddleSex has remained committed to Russia andother CIS countries.

Over the last four years, MiddleSexhas built up an impressive asset portfolio, developed extensive experience andknowledge of Russian industry and its Business etiquette and expanded itsnetwork of proven contacts. MiddleSex has secured itself a fundamental andstrategic role in a number of core industries and is now focusing on fivebusiness streams:

¨

Steel (anddirect reduced iron);

¨

Non-ferrousmetals (nickel);

¨

Financialservices ;

¨

Energy; and

¨

Agribusiness.

Inaddition, it has trade investment in gold and insurance.

(Eachof this these streams in particular I’m going to describe later on in myresearch paper. )

1996 proved to be a significant year for MiddleSex, inwhich the company experienced strong growth. This is particularly evident inthe metals businesses, with steel being the fastest growing activity. Moreover,it has become apparent that nickel and the agribusiness could take on a moresignificant role in the MiddleSex’s future. Other noteworthy event include thecompany’s appointment to GAZPROM, the world’s largest natural gas producer,under which MiddleSex will assist GAZPROM with its financial strategy. (Inshort words: GAZPROM is considering going ahead with an innovative financialdeal whose first stage will involve issuing a Eurobond. MiddleSex — togetherwith Interfin Services, a Russian trade finance house that is also involved incapital markets — will advise GAZPROM on dealing the financiers and onstrategies for fundraising. But, again, I’m going to explain in more detailslater on how this alliance was built and what particularly this alliance meansfor MiddleSex, because I think that this is the very important stage of thecompany).

Success ofevery company lies in its people.

Since 1993, the main driving forcebehind the company has been its Chief Executive, Masoud Alikhani. Born in Iranand educated at the Hebrew University of Jerusalem in Israel, Mr. Alikhani’swork experience spans from a kibbutz in Israel to agronomy in Iran and fromchemicals(the US chemicals, Du Pont) to securities business (Prudential-Bache).Alikhani was one of the first to recognize the enormous potential of Russia andother CIS countries. He had been trading there through his private businessesand had a wide network of contacts since 1988.

Alikhani’s plan appeared to be ambitious at first.From a small London base he aimed to create a group specializing in trading andfinance across a number of industries in the former Russian republics. He saw abig opportunity to provide development finance, western management skills andreliable sources of raw material to newly privatized countries. In October1993, Alikhani and six Russian contacts put £370,000 into MiddleSex.Other investors came up with another £250,000. As well as the equity,Alikhani undertook to put enough trading through MiddleSex to earn it £1million gross profit within. Masoud Alikhani and Phil Edmonds earlier had anagreement, once £ 1 million in the bank, Edmonds would let Alikhani turnMiddleSex into his own vehicle. Under the terms of Alikhani’s first deal,MiddleSex supplied raw materials to a Tadjikistan smelter and then exportedfinal goods to the West. This arrangement soon turned to be very profitable andAlikhani began haunting for new ventures.

At that time Alikhani understood that the company hadchanged its image completely, and had gone to a much higher lever, so itdesperately needed a well known person with a great huge worldwideexperience. Ant that was the time whenEdmonds stood down from the chairmanship and Lord Owen turned up. A formerforeign secretary and long-time European Union peace negotiator in the troubledBalkans .Also has a deep understanding of the mentality of the Slavic peopleand how to conduct business with them.

In 1996 another well known person in business hasjoint the company. Fahrad Moshiri, formerly with Ernst & Young and Deloitte& Touche turned up as Managing director in MiddleSex. He was mainlyresponsible for securing the US$300m contract with OEMK (OskolElektro-Metallurgical Kombinat ) and wasthe key in building the relationship with GAZPROM.

There many more people in the company whose personalworldwide experience has influenced the growth of the company, but it mighttake me hundreds of pages to describe the significant work they have for thecompany. I have mentioned, in my opinion, three most important and mostaffective people in MiddleSex. Once again, I have to say that the success ofany company, specially with a case ofMiddleSex, lies in its people and how these people effectively manage to bringtheir past experience into the company.

Steel. Theflagship operation.

At the beginning of 1996, MiddleSex entered into atrading agreement with OEMK, one of the most modern and profitable steel millsin Russia, for the export of up to US$300m of steel products per annum. Astrading was unfolding successfully, MiddleSex acquired a 7.9% interest in OEMK.Additionally, its 40 % owned investment vehicle, Interfin, holds another 6.6%of OEMK, which gives MiddleSex a further 2.6% indirect interest.

In august 1996, MiddleSex acquired DRI (IOM) Ltd.whose sole asset was the exclusive rights to export 40,000 metric tons permonth (±10%) ofthermally passivated direct reduced iron (DRI) pellets produced by OEMK. Directiron reduction technology is becoming increasingly popular as it significantlyimproves composition, reduces impurity contents and consequently enhances steelquality. DRI pellets are used as replacement for scrap material n modernelectric arc furnace steel mills. Hence, in addition to steel products,MiddleSex also controls the exports of OEMK’s DRI pellets. DRI trading iscarried out through MiddleSex’s 100% owned subsidiary, Oskmet (DRI) Limited.

In late 1996, MiddleSex acquired WolffSteel Ltd., anestablished international steel trading business, with a world-widedistribution network of clients.

As a result, MiddleSex currently records steel profitsfrom three sources: OEMK export contacts, DRI exports contacts and additionalWolffSteel trading :

Company

Gross Profit (£’000)

1996

1997

1998 (est)

1999 (est)

OEMK export

3697

6000

8250

8750

Oskmet (DRI)

1027

1024

11027

Wolff Steel

242

1200

Total

4035

8227

10,477

10977

The OEMK-MiddleSex relationshipextends beyond the trading agreement. MiddleSex monitors the day to day runningof the mill, the company’s management spends considerable time at the millwhile two OEMK representatives monitor steel trading in London on permanentbasis. In addition, OEMK has a 20 % interest in MiddleSex’s financial servicesarm, Interfin. Overall, according to what I have observed, I believe that thisrelationship is very strong.

Due to increasing environmentalconcerns and the subsequent growth of the electric arc furnace (EAF)steel-making facilities, direct iron reduction technology is becoming moreattractive. Originally, all DRI exports from OEMK were handled by DRI (IOM)Ltd. In August 1996 MiddleSex bought 100% of DRI Ltd. For a maximumconsideration of 2.8m and inherited a ten year exclusive world widedistribution.

DRI EXPORTS BY REGION(‘000 metric tonnes)

Region

1993

1994

1995

1996

1997

1998 (Est)

European Union

218.0

296.7

221.1

161.4

225.0

215.0

CIS

52.1

96.3

68.8

72.5

95.0

USA

5.0

37.1

42.5

57.5

Australia

33.0

26.0

0.4

44.3

28.5

35.0

Total

331.0

402.1

429.2

367.1

453.5

477.5

Since it gained the control over DRIexports, MiddleSex has managed to significantly expand the company’s customerbase. Currently, OEMK’s DRI pellets feed steel mills in USA, Spain, Germany,Italy and Mexico.

According to my observation I believe that a verticalintegration of MiddleSex’s steel activities is possible and would be highlybeneficial for both partners. Assuming that MiddleSex takes an equity interestin Lebedinsky GOK, the raw material supplier (such as iron ore), and increasesits equity interest in OEMK, MiddleSex would have an economic exposure toentire steel operation, from the raw material (Lebedisky), through the steelmill(OEMK) to trading (MiddleSex/WolffSteel)

Non-ferrousMetals

Aluminium was one of the originalbusinesses which Masoud Alikhani injected into MiddleSex when he joined in1993. The aluminium business was built upon Mr. Alikhani’s trading relationshipwith Tadaz, the third largest aluminum smelter in the world, located inTajikistan. Historically, the relationship with Tadaz was that MiddleSex wouldsupply the aluminium; it would pre-finance the processing and in return itwould receive the aluminium which it would then sell in the internationalmarkets. The relationship worked profitably. However, throughout 1996, thepolitical situation in Tajikistan deteriorated, trading cycles became longerand no deliveries were made in the last six months of 1996, leaving MiddleSexowned some US7.9m(£ 4.6m). MiddleSex believes it will recover this debt:it has already received US$2.4m(£ 1.5m) in late June 1997. Negotiationsare well advanced to collect the balance.

During 1996 MiddleSex diversifiedits non-ferrous business into nickel. In October 1996 it entered into ashort-term pilot contract with Napo Invest and Trade Corp., a companyincorporated in the British Virgin Islands and run by Mr. Yuri Murkin, a businessassociate of Mr. Alikhani, and two Russian companies: Koks, which owns theKemerovo coke plants and Kombinat Yuzhuralnikel, one of the biggest Russiannickel producers.

The government recently sold its 38%in troubled Norilsk Nickel, the biggest but also heavily debt-ridden Russiannickel producer. Following the Norilsk example, Yuzhuralnikel could be the nextto be auctioned. Interfin, MiddleSex’s 40% owned investment, has alreadysecured a 14.7% interest in the Yuzhuralnikel nickel plant, which givesMiddleSex a 5.9% indirect interest.

Overall I believe that MiddleSex isin strong position if it decodes to increase its interest in

Yuzhuralnikeland therefore its Yuzhuralnikel exposure to nickel. However, I have assumedthat MiddleSex will only extend the trading with Yuzhuralnikel.

FinancialServices

The backbone of MiddleSex’s financial servicesoperations is the 40% owned Interfin (Interbank Investment and FinanceCompany). The remaining 60% is held by GAZPROM (20%), OEMK(20%) and MapoBank(20%). MiddleSex’s financial services include:

·

trading inRussian capital markets;

·

financialadvise to western companies or potential business in Russia, and

·

advice toRussian companies entering western capital markets.

Established in late 1994, Interfin commenced bytrading in Russian treasury. Initial returns were good and Interfin quicklymade substantial profits, which enabled the company to start bying stakes in various Russian companies. As a result,Interfin has built an impressive asset base of which the company estimated tobe in excess of US$300m.

MiddleSex — GAZPROM relationship

MiddleSexholdings — a small, London based trading group — is advertising the worldbiggest producer and Russia’s biggest company GAZPROM on cheaper ways to raisefinance. The appointment came as a result of the close contact betweenMiddleSex’s and Interfin’s top management and GAZPROM. Principally the roleconsist of :

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Providingindependent advice in relation to the selection and implementation of differentfund raising strategies and regulatory requirements of international capitalmarkets;

¨

Liaisonwith advisors, once appointed, on behalf of GAZPROM as well as coordination ofGAZPROM’s fund raising and corporate activities;

¨

Assistingin the design and implementation of special project finance schemes andstructured long-term program of public and investor relations aimed atstrengthening GAZPROM’s position in the international capital markets.

In returns for its services MiddleSex receives fees,depending on the type of service provided, and determined by GAZPROM’s board,plus the reimbursement of its expenses in connection with travel, presentationand other expenses.

If relation with GAZPROM maintained,and GAZPROM’s current financial restructuring and capital raising plans arecarried out, I think this is the one of the most important step for MiddleSexholding, and they are well positioned to benefit and generate significantreturns.

Conclusion.

To sum up then, taking a closer lookat the Annual reports of the companies just confirming what I have researchedthrough different types of magazines and newspapers, as well some officialreports of the company. Through out the official statements it is crystal clearthat company had a very big boost when Massoud Alikani has arrived andrestructured the company almost completely, as well as brought some pastexperiences idea from the time he worked in Russia.

Then the company had another biggrowth in 1996 when the steel trading became the flagship operation and theystarted to work with OEMK.

References:

1.Guardian newspapers;

2.Financial Times newspapers;

3.Newsweek magazine;

4.Economic Research (russian);

5.MiddleSex Oficial Financial Statements .

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29 Августа 2013