IFC Injects $5.5 Million to Propel Daido's ZMZ Acquisition


The World Bank's International Finance Corporation (IFC) loaned USD $5.5 million to support Daido Metal Company's (Japan) acquisition of ZMZ Bearings (Russia).

Announced several months ago, the USD $20 million acquisition will create Daido Metal Russia Ltd., which the IFC said, "will help sustain jobs in Russia's automotive sector."

Founded in 1959, ZMZ manufactures engine bearings at a plant in Zavolzhje, Novgorod Oblasta, a relatively small manufacturing outpost along the Volga. Most manufacturing in the area has gradually become dedicated to supporting Russia's fast-growing automotive sector.

Properly named ZMZ Podshipnik Skolzheniya (ZMZ Thrust Bearings), the company had been a division of Zavolzhsky Motorny Zavod (ZMZ, or Zavolzhsky Motor Plant), appropriately located in Zavolzhsky. Parent ZMZ Motor manufactures gasoline and diesel engines for the domestic Russian auto and truck industry.

ZMZ Motor spun off ZMZ bearings and several other ancillary operations in a 2003-2004 restructuring, later writing off the value of its holdings completely and turning over operations to parent Severstal Auto Holding. After the spinoff, however, ZMZ Bearings still leased all of its facilities and equipment from parent ZMZ Motor.

Severstal said it divested ZMZ Bearing essentially as non-core operations in order to better focus its resources on other programs.

Daido signed the acquisition agreement on August 1; after an August 22 presentation, or Summary of Proposed Investment (SPI) IFC's investment was approved on November 9, 2007; it was signed on November 19, and the actual financial transaction took place on December 17, 2007.

The European Bank of Reconstruction and Development is also involved, partnering with Daido to acquire up to a third of the shares of ZMZ, or up to approximately $5 million.

Hideo Yoshida, Daido Metal's General Manager of Corporate Planning, said: "IFC’s financial support and regional expertise has played an important role in our investment in Russia."

Dimitris Tsitsiragos, the IFC's Director for Global Manufacturing and Services, said: "IFC is pleased to support a transaction that will introduce up-to-date technology and the highest-quality manufacturing standards of a top-tier Japanese auto parts supplier to Russia."

Jerome Sooklal, the IFC's Director for Central and Eastern Europe, said: "IFC’s investment will encourage foreign investors to look at opportunities in Russia’s regions beyond the Moscow and St. Petersburg areas."

Hiroshi Arichi, the IFC Director for Tokyo, said: "I am pleased that we could support Daido's investment in Russia. To establish their new production facilities, many Japanese automotive companies are looking at Russia. I hope we can continue helping them transfer technologies and contribute to growth."

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