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Alexander ShnaiderBusinessman
Country:
 Canada |
Content:
Biography of Alexander Schneider
Alexander Schneider is a Canadian businessman who made a name for himself in the Ukrainian business scene. In the 1990s, he acquired shares of "Zaporizhstal" and built a diversified conglomerate based on it. However, he gained fame not for this reason, but because of a brilliant PR move: in January, he bought one of the Formula-1 teams. This caused a frenzy of attention around his name. While it is common for business elites in many countries to invest in football clubs, purchasing a team for Formula-1 races was unheard of. Nevertheless, Alexander Schneider's unexpected acquisition of Jordan Formula-1 team aligns with his style. He once told reporters, "I have always loved this sport, but now Formula-1 is also part of my business. The connections we will gain from being involved in motorsport can benefit our other projects."
The Value of Connections
36-year-old Alexander Schneider recognized the value of connections early on. It was through skillful utilization of connections that he was able to earn his initial capital and subsequently build a powerful empire with a capitalization of around $4 billion. He was one of the first to discover the opportunities that arose in the metal trading industry after the collapse of the Soviet Union. At that time, Ukrainian metallurgical plants were state-owned and their directors realized that the only way to make money was to enter foreign markets. However, they lacked knowledge of export logistics. This situation was favorable for intermediaries who engaged in barter schemes and made significant profits. Alexander Schneider was among them. His choice to enter this business was natural as his parents owned a small store in Toronto, and he had helped them since childhood. When he saw the prospects in Ukraine, he started borrowing money from friends to purchase fabrics and electronics for barter with Ukrainian metallurgists.
Parallel to this, Schneider studied economics at York University and later worked for a steel trading company in Zurich. After gaining experience in the business, he established his own company of the same type in Belgium and continued his barter activities with Ukrainian metallurgists through it. However, this business reached its full potential when Schneider found a partner, Edward Shifrin, who was working for a trading company in Hong Kong in the early 1990s. Initially, they were competitors, but they later became friends, and Shifrin introduced Schneider to many influential individuals in Ukraine. Their friendship led to the establishment of a joint venture, Midland Resources, in 1994. The partners' business activities shifted towards purchasing Russian coal and supplying it to Ukrainian metallurgists in exchange for steel. The cost ratio of this exchange remained consistent. It was during this time that Schneider's unique brand emerged. He learned to operate in a way that never crossed paths with criminal elements. His agility not only ensured his safety in the challenging conditions of independent Ukraine but also allowed him to profit well from barter deals. However, in the late 1990s, this profitable business was under threat as such operations could only be carried out when enterprises were state-owned, and privatization was beginning in Ukraine.
In line with the rest of the post-Soviet space, shares of state-owned companies started to be sold to "their people," and in 1999, it was Zaporizhstal's turn. The manager of the state's shares was Vasily Khmelnitsky, a deputy, and it was his investment firm that engaged in the purchase of these shares. It was dangerous to interfere in the battle for the plant, so initially, Schneider and Shifrin decided to step aside. However, according to Schneider, if they had not been able to buy the plant, their highly profitable business could have come to an end. It was clear that the new owner would promptly eliminate intermediaries once it gained control. Therefore, the partners took the risk and started buying Zaporizhstal shares as they were put up for sale at cash auctions. Schneider's ability to negotiate with opponents played a crucial role. Midland Resources signed an exclusive contract for the export of steel produced by the plant, and naturally, they shared their profits with Khmelnitsky's structures. This well-thought-out strategy paid off. By 2001, control over Zaporizhstal had shifted to Midland Resources and Khmelnitsky's group. However, the partners faced obstacles in fully realizing their plans due to the government, which still held a blocking stake in the company (25%). Nevertheless, Schneider managed to influence the government, and it conducted a closed "auction" with specific terms written for a particular buyer: for the government's stake, the buyer had to provide the plant with 700,000 tons of iron ore or 400 tons of scrap metal. Thus, the remaining 25% of shares were obtained by Midland Resources for $13 million, and about $70 million was paid for the 93% that went to the consortium created by Schneider. Naturally, these facts caused a wave of criticism, and to quell this wave, Khmelnitsky reduced his shareholding in Zaporizhstal to 25%, selling 10% of the shares to Schneider.
The benefit of the deal can be judged by the fact that last year, Midland Resources refused to sell Zaporizhstal to a Western company that offered $1.2 billion for the plant. However, credit should also be given to the partners. Immediately after becoming owners of the plant, they began investing money in it with the same enthusiasm they had for extracting profits before. Over the past four years, investments in the reconstruction and modernization of the plant, which was built in the 1930s, have amounted to around $500 million. As a result, new blast furnaces were installed, and in 2006, a major overhaul of blast furnace No. 5 began. Additionally, Zaporizhstal aimed to participate in the MMK named after Ilyich project, which focused on developing the Kuksuksungur iron ore deposit. In addition, the plant owners purchased their own fleet of wagons, which significantly reduced transportation costs. As a result of their management in a high-priced steel market, Zaporizhstal's revenue from sales reached $1.3 billion last year, with a net profit of $129 million. Alongside resolving issues at the Ukrainian plant, Schneider and Shifrin engaged in other activities that led to the creation of a sprawling conglomerate on a global scale. Their business empire includes Armenia's energy system, a couple of hotels, a chain of bakeries, and a meat processing plant in Serbia. They also have small assets in Turkey and Israel, a steel plant in Volgograd, Russia, as well as an office building and casino on Old Arbat Street in Moscow. Furthermore, Schneider decided to participate in a project to build Canada's tallest building, promoted by renowned entrepreneur Donald Trump. Now, his name is once again in the news, this time due to the acquisition of the Jordan Formula-1 team, which Schneider plans to give Russian status. He explained this move to journalists, referring to a well-known quote by an unknown author: "Formula-1 is two hours of sport on Sundays and business for the rest of the time." According to him, "It is a profitable investment, including for our image. Moreover, Formula-1 is a high-tech sector of the automotive industry, and we can contribute knowledge, particularly in the production of spare parts, which we intend to enter in the future."
However, the change of power in Ukraine has somewhat clouded the previously bright prospects. Schneider's Ukrainian assets are currently undergoing thorough scrutiny, and Viktor Yushchenko is calling for a review of the privatization of particularly valuable state assets, including steel plants. If the new leaders take a serious interest in the privatization of Zaporizhstal and the preceding barter transactions, the plant's owners may encounter serious problems. Nevertheless, Schneider excels at operating under extreme conditions, and it is reasonable to believe that he will find an optimal solution in any situation.
