Government’s R8.5 billion steel giant buyout falls flat
ArcelorMittal SA’s exclusive talks with South Africa’s biggest development-finance institution regarding the potential sale of its local steel operation have ended without a deal, leaving the company free to seek other investors.
An informal proposal of about R8.5 billion from South Africa’s state-owned Industrial Development Corp. made to the Luxembourg-based steelmaker hasn’t broken the impasse, people familiar with the situation said.
Talks are continuing about a possible gradual takeover of ArcelorMittal South Africa Ltd., or Amsa, the people said, asking not to be identified because the company hasn’t made a public statement.
The deal, which covered about R7 billion of loans and interest to Amsa, wasn’t deemed sufficient by Arcelor and the IDC currently has little appetite to offer more, the people said.
The company’s stock fell the most since April on a closing basis.
“Engagements to explore alternative solutions continue,” Amsa said in a statement to the stock exchange in Johannesburg on Nov. 4. “Further announcements will be made in relation to these matters as and when appropriate.”
Amsa and the IDC declined to comment further. Amsa shares fell as much as 10%, to R1.33.
Talks between Arcelor, the IDC and South Africa’s trade and industry department started in November 2023 when Amsa announced it planned to shut two steel mills that produce grades that are crucial to the country’s key automotive and mining industries.
Those discussions intensified and became exclusive earlier this year when the IDC, which holds about 8% of Amsa, granted the steelmaker a loan to stave off the closure.
One of those mills, Newcastle, is now closed, and an associated iron-ore mine, run by Assmang Ltd., has been idled. With a suitable proposal, the Vereeniging mill could continue operating, according to one of the people.
In addition to these so-called long-steel plants, Amsa operates a flat-steel operation in Vanderbijlpark, south of Johannesburg, which makes sheets and other products used in manufacturing and construction.
It also owns idled facilities in Pretoria, the capital, and in Saldanha, on the west coast, as well as a shuttered iron-ore mine that could be reopened.
It’s unclear what plans industries dependent on Amsa’s products have made to cope with the closures. There are signs that relations between the company and the government are souring.
There’s little progress on a range of matters the two parties were discussing, including electricity-price discounts and a reduction in the support given to Amsa’s local competitors through a government-mandated discount on the international price of scrap steel, which they use to make their products instead of iron ore.
Amsa deemed a small reduction in that discount insufficient, it said in its first public comments aside from short stock-market statements that are mandatory.
“While presented as supporting industrial development, the policy continues a decade-long approach that has weakened the country’s steel sector,” it said in a statement.
“South Africa cannot afford policy choices that favour a narrow subset of beneficiaries while placing the wider sector and industry at risk.”
Amsa is also appealing a Labour Court decision that it reinstate several thousand workers who lost their jobs as a result of the Newcastle closure.
In the meantime, the most recent loan provided by the IDC enabled some stockpiling of steel products, and for alternatives for auto-makers and other manufacturers in the country.
Amsa, formerly known as Iscor Ltd., was acquired by Indian billionaire Lakshmi Mittal’s Mittal Steel Co. in 2003. Mittal in 2006 combined with Arcelor SA to form ArcelorMittal SA.
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