ArcelorMittal SA plans to sell its 50% interest in Netherlands-based Macsteel International Holdings for R2.8bn as SA’s largest steel maker seeks to strengthen its balance sheet and fund investments.
A subsidiary of Macsteel Holdings Luxembourg (MacHold) will buy ArcelorMittal SA’s interest in Macsteel International Holdings.
Macsteel International Holdings is 50% held by MacHold and 50% held by MSSA Investments, a wholly owned subsidiary of ArcelorMittal SA in the Netherlands that engages in steel trading and shipping.
"The proceeds of the sale will … strengthen the balance sheet of ArcelorMittal SA and will be used to fund working capital requirements and investments in the operating businesses," Kobus Verster, ArcelorMittal SA CEO, said on Monday.
"In the early years, most of the steel for the joint venture was sourced from ArcelorMittal SA," he said. "Today, while it remains an important source of steel products, ArcelorMittal SA supplies less than 20% of the total tonnages traded and less than 2% of volumes shipped by Macsteel International Holdings.
"It is for this reason that … we have decided to dispose of our interest," Verster said.
It is envisaged the disposal will be through a sale of shares agreement that will take into account optimal structuring from a commercial and legal perspective. Conditions precedent to the proposed transaction include ArcelorMittal SA and Macsteel International Holdings entering into a new, four-year marketing agreement. The companies will also obtain governance and regulatory approvals.
It is expected the sale of shares and marketing agreements will be executed by July 1 2018, but only implemented once all conditions precedent have been fulfilled or waived.
ArcelorMittal SA has been haemorrhaging billions of rand amid cheap Chinese steel imports and a lack of big infrastructure spend in SA.