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#FAS OKAYS VSMPO, AVISMA MERGER

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June 15 2005

MOSCOW. June 15 (Interfax) - Russia's Federal Anti-Monopoly Service (FAS) has given the go-ahead to a merger between Verkhnaya Salda Metallurgical Production Association (VSMPO), one of the world's biggest milled titanium producers, and Avisma, which produces up to 30% of the world's titanium sponge, FAS chief Igor Artemev announced at a Wednesday press conference in Moscow.

"The VSMPO-Avisma deal is not a simple one for us," Artemev said. The outcome will be a vertically integrated structure, in which "one of the parties to the deal will produce raw material for the other, and it will be important for the other one to have an proper amount of the corresponding titanium constructions," he said.

From a foreign economic standpoint, however, the creation of such a unified company will be positive, Artemev said.

"We understand that Russia is experiencing fierce competition on this market. From that standpoint, the positive effect is that Russia will improve its competitive position," he said.

On the other hand, "the unified company VSMPO-Avisma will enjoy a clearly dominant situation," Artemev said. The company has received strict FAS instructions aimed at minimizing the negative consequence of this and preventing high monopoly pricing, he said, and these proscriptions will be in effect permanently.

"They cannot get away from these restrictions under threat of falling under high sanction fines that include the adoption of changes that stiffen sanctions for violating anti-monopoly law," Artemev said.

Interfax: Daily Business Report