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The Binding Agreement With ArcelorMittal Is Part Of Vale’s Strategy To Simplify Its Portfolio And Thus The Miner Markets Its Exit From The Steel Sector
This Thursday (the 28th), mineral Vale announced the signing of a binding agreement with the steel company ArcelorMittal, aiming at the sale of the Pecém Steel Company (CSP). The deal was made in conjunction with Posco Holding Inc. and Dongkuk Steel Mill, both partners of Vale, who also sold their respective stakes.
It is worth highlighting, in this regard, that ArcelorMittal is a global leader in steel production, which can represent many benefits and significant growth for the Pecém steelmaker.
The Transaction, Whose Enterprise Value Is Approximately US$ 2.2 Billion, Is Still Subject To Usual Corporate And Regulatory Approvals
According to the Broadcast news site, the enterprise value of the transaction is around US$ 2.2 billion – an amount to be used for the early payment of the net debt balance of approximately US$ 2.3 billion.
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Now, the conclusion of the deal is subject to usual corporate and regulatory approvals, which includes review by the Administrative Council for Economic Defense (Cade). According to ArcelorMittal, this process is expected to be completed by the end of this year.
The Pecém Steel Company is located in the state of Ceará and was inaugurated in 2008 as a joint venture between Vale (50%), Dongkuk (30%), and Posco (20%). Furthermore, it has an installed capacity of three million tons of steel plates per year.
Vale Is Divesting From Non-Core Operations, Thus Withdrawing From The Steel Sector
Vale explains that the new deal is part of the miner’s strategy to simplify its portfolio by divesting from operations that are not core to the company, such as iron ore and nickel. In this vein, the company intends to focus on its greatest growth opportunities, guided by disciplined capital allocation. Thus, Vale officially withdraws from the steel sector.
In this context, the miner has previously held stakes in the Atlantic Steel Company (CSA) and California Steel Industries (CSI), with the latter being sold at the end of last year to Nucor Corporation for US$ 400 million.
ArcelorMittal Aims To Increase Its Presence In The Brazilian Steel Industry With The New Deal, As Well As Gain Other Strategic Benefits
ArcelorMittal, in turn, argues that the acquisition brings multiple strategic benefits to the multinational, such as the potential to expand its position within the Brazilian steel industry, in addition to the possibility of capitalizing on considerable third-party investment to form a clean electricity and green hydrogen hub at the Pecém steel facility.
The company also states that it can increase the production capacity of high-quality plates at highly competitive costs for the market, with the potential to supply plates within the group or sell them in North America and South America.
Finally, the deal should also enable ArcelorMittal to undertake new expansions, such as the option to add primary steelmaking capacity (including direct reduced iron – DRI) and rolling and finishing capacity. The company’s expectation is thus to capture over US$ 50 million in identified synergies, considering selling, general and administrative expenses (SG&A), procurement, and process optimization.
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