October 12, 2018 / 8:05 AM / 11 days ago

ArcelorMittal sells assets to Liberty House to facilitate Ilva deal

GDYNIA/LONDON (Reuters) - ArcelorMittal, the world’s largest steel producer, has agreed the sale of plants in the Czech Republic, Romania, Macedonia and Italy to Liberty House to satisfy regulatory requirements for its acquisition of Italian steelmaker Ilva.

FILE PHOTO: A worker processes liquid iron at an ArcelorMittal steelworks in Ostrava, Czech Republic, April 1, 2016. REUTERS/David W Cerny/File Photo

The announcement by ArcelorMittal on Friday did not disclose the value of the disposals, though investment bank Jefferies said they are unlikely to achieve a book value it estimates at $1 billion.

The sales satisfy part of an agreement with the European Commission, which approved the acquisition of Ilva - Italy’s largest steel plant by capacity - after ArcelorMittal pledged to sell a string of businesses across Europe to address competition concerns.

ArcelorMittal said talks were ongoing for the sale of ArcelorMittal Dudelange in Luxembourg and several finishing lines in Liege, Belgium, which were the other assets included in the agreement with the European Commission.

“Given a poor recent earnings track record, all disposal assets (including Dudelange and Liege) would be worth circa $750 million to $950 million on a peer-based EV/EBITDA basis,” said Jefferies in a note that reiterated its ‘buy’ rating on the stock.

“While there remains a wide range of expectations for disposal proceeds, this is sure to surpass the 180 million euros per annum that ArcelorMittal is paying the Italian state to acquire Ilva.”

Metal coils are unloaded from a train at ArcelorMittal steel plant in Ghent, Belgium, May 22, 2018. REUTERS/Yves Herman

SALZGITTER INTEREST

ArcelorMittal signed a preliminary agreement to pay 1.8 billion euros over 10 years for Ilva. It also promised to invest 1.2 billion euros to boost productivity and 1.1 billion euros to reduce pollution.

German steelmaker Salzgitter said it has submitted an offer for ArcelorMittal assets, while there is talk in the market that Russian steelmaker NLMK is also in the running.

ArcelorMittal said the closing of the deal with Liberty House, one of the world’s largest privately owned industrial groups with operations covering more than 30 countries, is subject to completion of the Ilva acquisition.

Liberty House, which has been snapping up distressed steel and aluminum assets, said the deal more than doubles its worldwide steel-rolling capacity to 15 million tonnes.

Jefferies said the sale to Liberty reduces market concerns that the ArcelorMittal furnaces would fall piecemeal into the hands of several smaller players, which could weigh on steel prices by increasing the number of competitors in the market.

“The sale to Liberty assuages fears that these assets could be acquired by potentially more disruptive Ukrainian/Russian peers, as previously rumored,” it said.

ArcelorMittal had been due to take control of Ilva on July 1, but the deal met with resistance from Italy’s new government, which questioned its validity.

In September, however, the company reached agreement with trade unions, prompting Deputy Prime Minister Luigi Di Maio to say he would no longer oppose the takeover.

Reporting by Alan Charlish in Gdynia and Maytaal Angel in London; Editing by David Goodman

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