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Russian miner Mechel OAO (MTL - Analyst Report) has entered into an agreement to sell its ferroalloys assets to Turkey-based ferroalloys company Yildirim Group for $425 million.

Mechel will dispose Voskhod Mining Plant in Khromtau, Kazakhstan and Tikhvin Ferroalloy Plant in Tikhvin, Leningrad Region, Russia. The Tikhvin Plant produces up to 120,000 tons per annum of high-carbon ferrochrome that is used to produce stainless steel. The Voskhod Plant is a modern chrome ore mine that produces chrome ore concentrate.

Mechel plans to utilize the proceeds from the deal to deleverage and continue to finance its priority development projects. The divestiture of the assets is a strategic move by Mechel, in sync with the ongoing restructuring assets program that was approved by its Board earlier.

Yildirim Group will pay the total amount for the transaction to Mechel immediately after the closure of the deal. However, the deal’s closure depends on all necessary approval required from Kazakh and Russian regulatory authorities and from corporate management agencies of both the companies.

Societe Generale Corporate and Investment Bank, ING Bank and Dechert LLP are the advisors to Mechel for this transaction. Following the announcement, Mechel’s shares rose 4.6% to close at $2.97 on Aug 1.

The acquisition will boost Yildirim Group’s production capacity to a world-class level at 2.5 million tons per annum. Yildirim Group is the owner of production plants at Eti Krom in Turkey and Vargon Alloys AB in Sweden. With the addition of Mechel’s ferroalloys assets, Yildirim Group will place itself among the prominent players in high-carbon, high-quality ferrochrome production.

Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys. The company has the largest coal reserve base in Russia and is mainly focusing on growth and cost-cutting measures.

Mechel retains a Zacks Rank #4 (Sell).

Other companies in the steel industry with favorable Zacks Rank are Nippon Steel & Sumitomo Metal Corp. (NSSMY), Ternium S.A. (TX - Snapshot Report) and Kobe Steel Ltd. (KBSTY). While Nippon Steel holds a Zacks Rank #1 (Strong Buy), both Kobe Steel and Ternium retain a Zacks Rank #2 (Buy).

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