ArcelorMittal, Marcegaglia Offer to Buy Italy's Largest Steel Plant Ilva -Update
June 30 2016 - 12:10PM
Dow Jones News
By Alex MacDonald and Razak Musah Baba
LONDON--A consortium made up of steel firms ArcelorMittal (MT)
and Marcegaglia have submitted an offer to buy Europe's largest
steel plant, Ilva.
The Italian government last year took control of the
administration of the loss-making plant in the southern Italian
city of Taranto, with a view to saving the plant's roughly 16,000
jobs and improve its pollution track record.
The acquisition of the flat steelmaking plant, if it goes ahead,
would mark ArcelorMittal's first major purchase since partnering
with Japan's Nippon Steel & Sumitomo Metal Corporation to buy
the Calvert, Alabama U.S. flat steel plant for $1.55 billion in
2014.
It comes at a time when European steelmakers are struggling to
cope with excess production capacity globally, shedding thousands
of jobs and selling loss-making plants in a bid to cope with anemic
steel demand growth and an influx of cheap steel into Europe from
China, the world's largest steelmaker.
"We believe Ilva represents a compelling investment opportunity
for ArcelorMittal, without compromising our balance sheet strength,
as it would extend our leadership position and increase our product
offering in Italy, Europe's second-largest steel manufacturing and
consuming market," said Geert Van Poelvoorde, CEO of
ArcelorMittal's Europe Flat Products unit.
The Luxembourg-based steelmaker, the world's largest by output,
plans to improve Ilva's product mix, quality and productivity in
order to return the plant to profitability. This would involve
boosting the plant's output to more than 6 million tons of steel
output annually by 2020 from the current 4.8 million tons produced
annually from three blast furnaces. The steelmaker said it's
committed to operating a minimum of three blast furnaces. "In the
longer term we will evaluate production volume increases based on
market demand and the performance of the asset," he added. Ilva is
capable of producing more than 9 million tons from five blast
furnaces, although two are currently idled.
Jefferies analyst Seth Rosenfeld believes ArcelorMittal's offer
may be a defensive move. "By acquiring Ilva, ArcelorMittal can
ensure that the plants are not run at higher utilization rates,"
thereby helping keep a lid on supplies while ensuring the
sustainability of recent flat steel price rises, he said.
Ilva is the E.U.'s fourth-largest flat steel producer after
ArcelorMittal, Germany's ThyssenKrupp AG, and India's Tata Steel
Ltd, accounting for 7% E.U. flat steel production. The offer is
structured in such a way that ArcelorMittal would likely own an 85%
stake in the plant, while Italy's Marcegaglia, a privately owned
finished steel manufacturer that is Ilva's largest customer, would
own a 15% stake, according to an ArcelorMittal spokesman. No
financial details were disclosed.
The Italian government will now spend the next 120 days
reviewing the environmental aspects of all offers submitted on
Thursday, before providing more clarity on the next steps of a
multi-stage process that doesn't have a formal end-date.
Write to Alex MacDonald and Razak Musah Baba
(END) Dow Jones Newswires
June 30, 2016 11:55 ET (15:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
ArcelorMittal (EU:MT)
Historical Stock Chart
From Jun 2024 to Jul 2024
ArcelorMittal (EU:MT)
Historical Stock Chart
From Jul 2023 to Jul 2024