ARCELORMIT­TAL

Finweek English Edition - - COVER -

ArcelorMit­tal South Africa ( Amsa), the countr y ’ s big­gest steel pro­ducer, has re­ceived bids from em­pow­er­ment con­sor­tiums as it faces in­creas­ing pres­sure to im­prove its BEE rat­ings to ben­e­fit from state pro­cure­ment spend­ing.

One broad-based black em­pow­er­ment con­sor­tium made an of f er to t he ArcelorMit­tal Group to buy its stake of nearly 47% in Amsa in June and again in Septem­ber. Doc­u­ments seen by show the in­volve­ment of one of S A’ s lead­ing in­vest­ment banks, which s e n t a rep­re­sen­ta­tive to London in June to dis­cuss the of­fer in per­son with Sud­hir Ma­hesh­wari , who heads merg­ers and ac­qui­si­tions and sits on the ArcelorMit­tal Group board.

The of­fer was de­clined, but it is un­der­stood that the con­sor­tium re­mains in­ter­ested in

BY JANA MARAIS ac­quir­ing a 26% em­pow­er­ment stake in Amsa. Its bid en­joys strong support from the depart­ment of trade and in­dus­try, which has long had a fraught re­la­tion­ship with ArcelorMit­tal over pric­ing, a per­son in­volved with the mat­ter said.

“A stake of 10% will do noth­ing – they won’t be able to ef­fect any change. What they’d like is if the com­bined stakes of the con­sor­tium, I DC [with 7. 9%] and PIC [7.35%] are more than 40% al­to­gether. A block of 40% can’t be i gnored by Mit­tal,” the source said, re­fer­ring to head of­fice in London, which con­trols t he l ocal business and earns sub­stan­tial man­age­ment fees even when the company is re­port­ing l osses. The con­sor­tium has f unds avail­able and also wants to i nvest sub­stan­tially i n ArcelorMit­tal’s age­ing Van­der­bi­jl­park plant, bid doc­u­ments show.

ArcelorMit­tal said that it will ad­dress the own­er­ship is­sue “at a later stage” and that it is not en­gag­ing with any par­ties re­gard­ing a BEE deal at present.

Amsa, which last re­ported an an­nual profit in 2010, is cur­rently ranked as a Level 7 BEE contributor, s cori ng zero on own­er­ship, em­ploy­ment eq­uity and en­ter­prise de­vel­op­ment, a ccord­ing t o a verif i c ati on cer t i f i c ate on i t s web­site that i s valid un­til De­cem­ber.

“It is a strate­gic im­per­a­tive for Amsa to im­prove its B-BBEE rat­ing. Un­der the lead­er­ship of the CEO, we have set up a spe­cific B-BBEE com­mit­tee to ad­dress the is­sue from the bot­tom up as a mat­ter of ur­gency. This means that the pil­lars of pro­cure­ment, en­ter­prise de­vel­op­ment, em­ploy­ment eq­uity and skills de­vel­op­ment are be­ing pri­ori­tised,” says spokes­woman Ke­se­bone Maema.

The s t e e l maker has been l ob­by­ing to ben­e­fit f rom the state’s pref­er­en­tial pro­cure­ment pro­gramme, as i nfras­truc­ture spend­ing is a ma­jor contributor to sales. Paul O’Fla­herty, who took over as CEO in July, said in Oc­to­ber that he wants im­port du­ties to be in­tro­duced on Chi­nese steel.

A ms a is also lob­by­ing t he I ndus­trial De­vel­op­ment Cor­po­ra­tion (IDC) over its plans to build a new steel plant i n the coun­try with China’s He­bei I ron & Steel Co., a move the s teel­maker s ays will l ead to fur­ther over­ca­pac­ity in the lo­cal mar­ket. Tak­ing steps to ad­dress its dis­mal em­pow­er­ment sta­tus will be cru­cial to get gov­ern­ment support for its var­i­ous lob­by­ing ef­forts to in­crease pro­tec­tion in

Paul O’Fla­herty

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