JANUARY 24, 2005

Midland - where does the money come from?

The Midland Group, the new owner of Jordan Grand Prix, seems to be rolling in cash, at least that is how it looks when one examines the impressive list of acquisitions it has made in the last three years. The Midland empire is said to have revenues of $2bn a year but as it is registered in Guernsey, where confidentiality laws are still strict, there are no actual details of its financing.

Midland is run by chairman, 36-year-old Alexander Shnaider, a Russian who grew up in Israel before emigrating to Canada, where he now has citizenship. According to The Toronto Star, after graduating from university in Canada Shnaider went to work for an international trading company in the Ukraine. At the time when the old Soviet Union was breaking up and when Ukraine emerged as an independent country there were some extraordinary opportunities for entrepreneurs. Shnaider told the Canadian newspaper that the steel mills in the Ukraine were without customers at the time and so he and his partner Eduard Shifrin did a deal with one of the steel companies to sell steel and pay the companies back after the deals had been finalised. This unusual arrangement was such a success that Shnaider and Shifrin made sufficient money to buy control of Zaporozhstal, Ukraine's top steel company, when it became a joint stock company in January 1997.

Gaining control of Zaporozhstal helped the two men to become hugely wealthy in the years that followed and funded Midland's growth. The company has also benefited in the last two years from surging steel prices which have resulted from huge extra demand from China. Midland diversified into steel-trading activities through Midland Resources Holding Ltd and Midland Industries Ltd and then into the scrap metal trade via a number of companies including Dan Recycling, the largest scrap processing operation in Israel. The firm also went into steel warehousing with businesses in Turkey, Britain, Serbia and Poland. This was followed by the establishment of two shipping companies: Midland River-Sea Shipping and Midland Shipping.

In addition Midland has added to its holdings ownership of the port of Pancevo on the Danube and a copper and brass mill in Serbia. It bought the national electricity distribution company of the Republic of Armenia but is already to looking to sell that because of opposition to the deal within Armenia.

Since the start of 2003 Midland has invested heavily buying the Red October steel works at Volgograd in Russia, Montenegro's Niksic metal company, the Kremenchug steel casting company in the Ukraine, there has also been the Dneprodzerzhinsk Railcar Foundry and the Donetskprodtorg trucking company. It has also bought Gumaplast, a producer of rubber and plastic weatherseals for the automotive industry in Serbia.

The company enjoys close links with the Moscow municipal government in Russia and has developed the Arbat Business Center in Moscow and is also involved in a big project to build overpasses throughout the city, each combining business, entertainment and shopping areas. In addition the firm has a deal until 2019 to operate containers for selective collection of municipal waste and will use these to advertise as well as collect rubbish. It has also recently signed a deal with Moscow to turn an old metal processing center in the Shabolovka district of the city into a housing development with condominium-style apartment blocks.

In addition to all of this Midland has bought a meat-processing company and a bakery chain in Serbia not to mention a number of hotels and restaurants in Belgrade including the Hotel Kasina, the oldest hotel in the city. There is also an involvement with US tycoon Donald Trump in the development of a Trump International Hotel and Tower in Toronto and another Trump-badged project in Hong Kong.

Keen to have a high profile international image, Midland has now decided to enter F1 and it would be a surprise if some of the companies listed above where not tapped for sponsorship. The team has hired Boris Yeltsin Jr to work in its marketing department but will be represented at races by a rather more western management, involving Colin Kolles as managing-director. Kolles is the driving force behind Kolles Racing and TME Racing, two contenders in the Formula 3 Euro Series. The marketing director will be Christian Geistdoerfer, a former World Rally Championship co-driver, who won World Championships with Walter Rohrl in 1980 and 1982 before starting up an event management agency. In addition the company will feature Gary Anderson as technical director.