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OAO Severstal and subsidiariesOAO Severstal and subsidiariesNotes to the consolidated financial statementsfor the years ended December 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars, except as stated otherwise)Notes to the consolidated financial statementsfor the years ended December 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars, except as stated otherwise)In December 2008, the Group completed the acquisition of a 100.0% stake of a trading company, ZAO Trade HouseSeverstal – Invest, for a total consideration of US$ 27.4 million. ZAO Trade House Severstal – Invest owns a 99.0%stake in OOO North Steel Company, a 87.0% stake in OAO Rostovmetall, and a 99.0% in ZAO PPTK-1.Acquisitions of subsidiaries from third and other related partiesAcquisitions in 2006In February 2006, the Group acquired a 57.9% stake in joint stock company Dneprometiz for US$ 34.8 million.Severstal also obtained an option to buy an additional 27.0% stake of the share capital after one year for aconsideration in the range from US$ 14.0 to US$ 20.0 million. Dneprometiz produces wire and certain othermetalware products at its production facilities located in Ukraine.During August – December 2007, the Group acquired an 86.3% stake in Celtic Resources Holdings Plc. for a totalconsideration of US$ 264.6 million. Celtic Resources Holdings is a mining company based in Dublin, Ireland. CRHowns and operates gold mines, including the Suzdal Mine (Alel JSC) and Zherek Mine (Zherek LLP) in Kazakhstan.The acquirees’ profit since the acquisition dates included in the Group’s profit for the period, is insignificant to theGroup’s profit for the period. The acquirees’ revenue and profit from the beginning of the period to the dates ofacquisition comprised US$ 62.0 million and US$ 7.0 million respectively.Acquisitions in 2008In January 2008, the Group acquired a 91.6% stake in OAO StalMag for a total consideration of US$ 17.6 million. OAOStalmag is a ferroniobium producer which production will be used by the Group’s entities.In April 2006, the Group acquired 100.0% of Carrington Wire Ltd., a UK wire and other metalware products producer,for US$ 30.5 million.Loss since the acquisition dates included in the Group’s profit for the period amounted to US$ 16.0 million. Theacquirees’ revenue and loss from the beginning of the period to the dates of acquisitions are insignificant to theGroup’s revenue and profit for the period.Acquisitions in 2007In January 2007, the Group completed the acquisition of 84.8% of the share capital of ZAO Vtorchermet and itswholly-owned subsidiaries and certain related companies for a total consideration of US$ 45.4 million. ZAOVtorchermet is a scrap processing and wholesale company, and the majority of its operations are located in SaintPetersburg.In March 2007, the Group purchased 100.0% of the share capital of Siderco SpA from the Lucchini family for 1.4million (US$ 1.8 million at the transaction date exchange rate).In May 2007, the Group completed the acquisition of a 100.0% stake in a stevedore company, ZAO Neva-Metall, forUS$ 98.7 million and 100.0% of the shipping agency ZAO Neva-Metall Trans for US$ 1.3 million from a related party.The majority of their operations are located in Saint Petersburg.In July 2007, the Group acquired a 100.0% stake in each of the companies OOO Georesurs, OOO Severstal-Vtormet,and OОO SPB-Giproshakht for a total consideration of US$ 2.1 million, US$ 24.9 million, and US$ 6.3 million,respectively.The acquiree’s profit since the acquisition date included in the Group’s profit for the period, as well as the revenueand profit from the beginning of the period to the date of acquisition are insignificant to the Group’s revenue andprofit for the period.In May 2008, the Group acquired a 100.0% stake in Sparrows Point LLC (re-named to Severstal Sparrows Point LLC)for a total consideration of US$ 818 million, subject to certain adjustments of US$ 48 million, resulting in a finalconsideration paid of US$ 770.0 million. Sparrows Point LLC is an integrated steel plant on the East Coast of USAwith its own deep water port and rail connection to the main East Coast rail networks.The acquiree’s loss from the beginning of the period to the date of acquisition is insignificant to the Group’s profitfor the period. Loss since the acquisition date included in the Group’s profit for the period amounted to US$ 130.8million. The acquiree’s revenue from the beginning of the period to the date of acquisition comprised US$ 766.1million.In July 2008, the Group acquired a 100.0% stake in WCI Steel Inc. (re-named to Severstal Warren Inc.) for a totalconsideration of US$ 443.1 million. WCI Steel Inc. operates a steel mill in Warren, Ohio, and is an integrated producerof flat-rolled steel products, including high carbon, alloy, ultra high strength, and heavy-gauge galvanized steel.The acquiree’s loss from the beginning of the period to the date of acquisition is insignificant to the Group’s profit forthe period. Loss since the acquisition date included in the Group’s profit for the period amounted to US$ 41.7 million.In addition an impairment loss of US$ 382.6 million has been recognized and was allocated to property, plant andequipment in the amount of US$ 376.0 million and to goodwill in the amount of US$ 6.6 million, as discussed in Note8. The acquiree’s revenue from the beginning of the period to the date of acquisition comprised US$ 498 million.In October 2007, the Group acquired a 100.0% stake in OOO Nerengri-Metallik and a 100.0% stake in ZAO MineAprelkovo for a total consideration of US$ 105.0 million and US$ 153.0 million, respectively. OOO Nerengri-Metallikmines gold from the Tabornoye deposit in the Sakha-Yakutiya Republic, ZAO Mine Aprelkovo mines from thePogromnoye gold deposit in the Chita Region. Both deposits are operated as open-pit mines with gold extractedutilizing heap leaching technology.The acquirees’ profits since the acquisition dates included in the Group’s profit for the period, as well as the revenueand profit of the acquired entities from the beginning of the period to the dates of acquisition, individually and in theaggregate, are insignificant to the Group’s revenue and profit for the period.In July 2008, the Group acquired a 100.0% stake in Redaelli Tecna SpA for an approximate total considerationof 35.0 million (US$ 54.8 million at the transaction date exchange rate). Redaelli Tecna SpA is a manufacturer ofhigh performance wire ropes for industrial hoisting, mining, cableways, material transportation, etc. Managementhas not yet completed the estimation of fair values of the acquired assets and liabilities and, accordingly, the initialaccounting for the acquisition was determined provisionally. Final purchase price allocation is expected to becompleted within one year starting from the date of acquisition.The acquiree’s profit since the acquisition date included in the Group’s profit for the period, as well as the revenueand profit from the beginning of the period to the date of acquisition are insignificant to the Group’s revenue andprofit for the period.160161