ArcelorMittal sells assets to Liberty House

Assets likely to sell for less than $1bn book value: Jefferies; still in talks to sell assets in Luxembourg and Belgium; deal would double Liberty House capacity to 15mn tonnes

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.

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

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 $750mn to $950mn 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 180mn euros per annum that ArcelorMittal is paying the Italian state to acquire Ilva.”

ArcelorMittal signed a preliminary agreement to pay €1.8bn over 10 years for Ilva.

It also promised to invest €1.2bn to boost productivity and 1.1bn 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 aluminium assets, said the deal more than doubles its worldwide steel-rolling capacity to 15mn 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 rumoured,” 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.

An employee overlooks as sheets of steel are prepared for pressing at the ArcelorMittal research and development centre in Montataire, France. 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 sale agreement with the European Commission.