Evraz will pay 7.05 billion Kč ($284 million) for the government's roughly 99 percent stake in the company and assume full control in three months following approval by the Anti-Monopoly Office. It will be acquiring, however, a company under threat of losing pig iron supplies from regional producer Vysoké pece Ostrava (VPO), owned by Mittal, vital to its steel production and survival.

"The most critical thing is whether they continue to buy pig iron from VPO or they import the slab," said Harvey Gordon of EuroStrategy Consultants, which monitors the steel industry for the European Commission. "If they import the slab, they might shut down operations [at Vítkovice]."

VPO and Vítkovice have been locked in a battle that goes back two years but has escalated as Mittal Steel has fought to gain admittance to the privatization that it was ousted from in March. The government excluded Mittal based on the dispute with Vítkovice's parent company Osinek, saying it violated the condition of the proceedings stipulating that suitors cannot be in dispute with the government, Vítkovice or Osinek.

It's too early to tell if Evraz and Mittal, which still has 9 billion Kč it intends to keep on the table until the company officially changes hands, will be able to reach an agreement on a supply contract. The two sides won't enter into negotiations until the former takes full control of the company. Failure to reach an agreement, however, would have serious ramifications for Vítkovice, according to analysts.

Industry and Trade Minister Milan Urban dismissed this possibility at a July 13 press conference, saying a long-term deal would be lucrative for both sides. Urban added that the Anti-Monopoly Office would have to approve importation of crude steel from Russia.

For its part, Evraz says it's in favor of continuing to deal with VPO.

"Evraz strongly believes that pig iron supplies from VPO would be the most beneficial for Vítkovice in terms of logistics, technology and economics," said Irina Osadchaya of the public and investor relations department at Evraz Holding. "We are sure that these negotiations will be concluded to the benefit of both companies and, importantly, to the benefit of the Ostrava region."

However, according to Roman Cenek, an analyst at Atlantik Finanční trhy, rumors persist that Evraz might be looking to import some materials. Cenek pointed out that such a strategy could prove cost prohibitive.

And there's no telling how Mittal Steel will approach negotiations. Indeed, shortly after Evraz was announced the winner of the tender, Ondra Otradovec, Mittal's director of mergers and acquisitions, told the BBC that it was probable VPO would cut supplies, according to information released by Mittal's local public relations agency, Mmd. Taking this step would harm VPO as well, forcing it to shut down one production block because the market lacks another buyer to meet Vítkovice's needs.

Tough fight

The battle for Vítkovice started last November, when the government approved the Finance Ministry's proposal to sell the state's stake. Four companies, including Mittal Steel, expressed immediate interest, and the process progressed in two rounds.

Nineteen companies registered for the tender in January. The field was narrowed to eight at the end of March, shortly after Mittal was eliminated, with Bancroft Private Equity boasting the highest bid, 7 billion Kč.

After the field was cut to five earlier this summer, the commission, led by Deputy Industry and Trade Minister Martin Pecina, recommended Evraz take the tender. Last-minute bids by both Mittal and Třinecké železárny, one of the remaining five suitors, followed. The government said it considered Třinecké železárny's new bid but ignored Mittal's 9 billion Kč offer because the company was excluded by the rules.

Mittal Steel was still hopeful its offer would be considered even as it became clear the government would approve Evraz. It remains interested in the company, seemingly oblivious to the fact that it was never admitted to the tender in the first place.

"We [have] not decided what our strategy should be should we fail in the privatization," Otradovec said in a phone interview July 18. "We are still interested."

There are no signs that the government or Evraz are considering any changes to their respective decisions.

Pecina said the government is satisfied with the selection of Evraz and the terms of its deal. Evraz has agreed to invest an additional 2.5 billion Kč in developing the company's manufacturing processes and distribution network. It also promised to maintain Vitkovice's current level of employment, Urban said. It if fails to do so, it will be fined 500,000 Kč for each employee let go.