Teacher becomes student

17 November 2008 By Lauren Silva

The buyout firm is suing Russia s Novolipetsk Steel for walking away from a deal to buy John Maneely. Buyout firms know the broken deals game well, often from the other side. Like recipients of LBO offers, private equity firms should stresstest their buyers.

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Novolipetsk Steel agreed on August 12 to buy Carlyleowned DBO Holdings, the parent company of steel company John Maneely, for $3.5bn. The deal was supposed to close on September 29. On that day, Novolipetsk proposed a revised schedule to close the deal on October 15, and then sought to renegotiate the price, according to Carlyle's lawsuit. Carlyle claims Novolipetsk said financial market conditions warranted a reduction in the purchase price or a significant restructuring of the merger transaction."

Carlyle claims that Novolipetsk materially breached its contract because "despite having the necessary financing available, Novolipetsk failed to and continues to fail to take necessary actions ... to consummate the merger transaction as soon as practicable."

On November 14, Carlyle said that Novolipetsk Steel terminated the agreement. Daniel Pryor, Carlyle managing director said: We are disappointed that Novolipetsk has chosen to breach its obligations under the merger agreement. However, John Maneely is an exceptional company with superb employees and a proven management team. We see many opportunities to continue building and strengthening the business.

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