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Russia: Merger Creates Industrial Giant

St. Petersburg, 6 March 1998 (RFE/RL) -- Yekaterinburg's Uralmash has effectively absorbed St. Petersburg machine factory Izhorskiye Works through a merger that will give the new company a near monopoly nationally in various sectors of heavy machinery manufacturing.

"The merger can best be described as a 'civilized swallowing' of Izhorskiye," the head of Uralmash's technical division, Vladimir Turchinsky, tells RFE/RL.

According to an Uralmash, the new company will have estimated total sales of $500 million this year. "The merger will result in an industrial giant, offering complete product lines, strong engineering, and responsive customer service," said Kakha Bendookidze, chairman of the board of the holding company, Uralmash Works. "The combined production of Uralmash and Izhorskiye Works assures us a dominant position in several product areas in Russia, and enhances our opportunities for export and entry into new markets," Bendookidze added.

Though bigger is not necessarily better, analysts hail the merger as a boon for the Russian engineering sector. "This could be the salvation for both factories, and for the Russian heavy machine building sector as a whole," said Yevgeny Sidirov, who works at Lenstroimateriali, a leading St. Petersburg brokerage house.

The companies had signed a statement of intent last month (Feb. 22), but news of the merger came only this week, just hours after an announcement by Izhorskiye Works that Uralmash's financial adviser, the Moscow-based Oil Investment House, was the winner of an auction of 15 percent of Izhorskiye's share capital. The Oil Investment House already owns 40 percent of Uralmash.

Uralmash's Turchinsky added that both factories will be united under a single management, working along the lines of a single plan. All manufacturing, and research and development will also be centrally controlled, he said.

The output of the two factories includes drilling rigs, mining equipment, excavators, pipe for gas pipelines, steel, steel mills, and nuclear power plants. Uralmash currently has a joint venture with the American company Caterpillar, while, in January, Izhorskiye created a joint venture with Gazprom and Germany's steel giant Mannesmann.