ArcelorMittal led consortium reaches agreement regarding Ilva lease and purchase agreement
June 16 2017 - 10:02AM
16 June 2017 - ArcelorMittal ('the Company') and
Marcegaglia announce that AM Investco Italy Srl ('AM Investco') has
concluded the exclusive negotiation phase and reached a binding
agreement concerning the lease and obligation to purchase Ilva
S.p.A and its subsidiaries with the Italian Government. The
ancillary documentation will be completed by 30 June. Intesa
Sanpaolo will formally join the consortium before transaction
closing.
Strategic highlights
- Unique opportunity to acquire a major, integrated steelmaking
asset which is Europe's largest single steel site, in Europe's
second largest steel market
- Robust investment plan to materially improve Ilva's
environmental footprint and realise its full potential
- Identified synergies of €310 million targeted by 2020 (excludes
impact from fixed cost reductions and volume improvements)
- Ilva expected to be EBITDA accretive to ArcelorMittal in year
one, and free cash flow accretive in year three.
Transaction highlights and key details of AM Investco's plans
for Ilva include:
- Purchase price of €1.8 billion, with annual leasing costs of
€180 million to be paid in quarterly installments. Ilva's assets
will be initially leased by AM Investco, with rental payments
qualifying as down payments against the purchase price. Start of
lease expected around year-end 2017, subject to regulatory
authorisations. Lease period to be minimum of two years.
- Investments of c. €2.4 billion (c. €2.1 billion net of Riva
Group contribution) over a seven-year period:
- Industrial CAPEX of c. €1.3 billion, supporting an extensive
industrial plan; investment programme focussed on blast furnaces,
steel shops and finishing lines
- Environmental CAPEX of c. €1.1 billion that will ensure Ilva
complies with the Integrated Environmental Authorisation (AIA) as
set out by the Italian Government and will materially improve
Ilva's environmental performance in areas including air emissions
and water treatment; environmental CAPEX includes remediation spend
of €288 million, which will be funded with funds seized by the
Italian Government from the Riva Group, Ilva's former owners;
further intention to introduce breakthrough low-carbon
technologies, including carbon capture and re-use, in the future;
and commitment to use DRI when there are the conditions of economic
sustainability coherent with the industrial plan
- Finished steel shipments to systematically increase to 9.5
million tonnes, by 2023. Crude steel production limited to 6
million tonnes per annum until AIA provisions complied with; once
achieved, commitment to restart blast furnace #5 and increase crude
steel production to 8 million tonnes per annum; crude steel
production to be supplemented by imported slabs and hot rolled
coil, in order to maximise utilisation of Ilva's finishing
facilities, with a commitment to keep at least 10,000 employees for
the entire duration of the industrial plan according to the outcome
of negotiations with the unions.
- €10 million start-up investment in new research and development
(R&D) centre in Taranto, which will initially focus on ensuring
a successful deployment of the industrial, environment and
commercial plans, while also ensuring a smooth transfer of
ArcelorMittal R&D intellectual property and knowledge to
enhance operationally efficiency, quality and productivity at all
Ilva plants.
- The assets will be transferred to AM Investco free of long term
liabilities and financial debt and includes €1 billion of net
working capital.
Strategic rationale
- Ilva represents a unique opportunity to add significant value
to ArcelorMittal's European business
- Ilva is the largest, and only integrated, steelmaker in Italy.
Its main production facility in Taranto is strategically well
located, sitting next to one of Europe's largest deep-water ports,
hence enabling easy access to raw materials. Ilva also has
significant steel finishing capacity, in Taranto, Novi Ligure and
Genova
- It provides ArcelorMittal with a primary production presence in
Italy, Europe's second largest steel consuming market, and a
country in which the Company currently has no primary steelmaking
capacity
- Italy imports between 60 and 70% of its flat steel
requirements, in part due to a decline in Ilva's output because of
numerous commercial, quality and environmental issues it has faced
in the recent past; ArcelorMittal believes that, over time, Ilva's
production levels and competitiveness can be restored
- ArcelorMittal can accelerate Ilva's turnaround through:
- Leveraging ArcelorMittal's high-added value product range,
particularly in the automotive market, and upgrading Ilva's
production facilities in order to extend and improve its product
range
- Leveraging economies of scale benefits in areas including
procurement
- Opportunity to benchmark against ArcelorMittal's best
performing plants and transfer knowledge and expertise to improve
Ilva's operational performance, quality and efficiency
- Leveraging ArcelorMittal's world-class research and development
offering, and rapidly deploy steelmaking process and product
solutions at Ilva
- Capturing €310 million of identified synergies.
Commenting Lakshmi N. Mittal, Chairman and CEO,
ArcelorMittal, said:
"Today marks an important step in the Ilva sales
process. We are keen to get started and will now focus on
reaching completion as soon as possible.
"We have a very sound understanding of what needs to be done to
improve the performance of the company and, importantly, its
relationship with stakeholders and local communities. Our
vision is for Ilva to become a benchmark for modern integrated
steelmaking and this will be realised through the implementation of
our industrial and environmental plans, backed up by significant
investment. We have the capital, the technology, the commercial
relationships and the management depth to bring about a positive
transformation. Stakeholder engagement and transparent
dialogue will also be critical in enabling Ilva to rebuild trust
with its employees and communities.
"We recognise the trust that is being placed in us as the new
owner of Ilva and will take great care to provide Ilva with the
responsible and capable leadership it deserves and that will be
vital for its future success and sustainability."
Aditya Mittal, CEO of ArcelorMittal Europe and group CFO,
said:
"Ilva is an important strategic acquisition for ArcelorMittal.
It provides us with a significant production presence in a country
in which we have no primary steelmaking capacity, and is
complementary to our existing European business. I believe that it
represents a unique opportunity for us, and am delighted that we
have proved successful with our offer. We have a lot of work to do
once the transaction formally closes and we take up operational
control of Ilva, but I believe that we can improve its performance
quickly, and we expect a positive contribution to EBITDA in year
one. Over the longer-term, there is no reason why Ilva's
performance can't be brought in-line with the best performing
assets within our European business."
Antonio Marcegaglia, Chairman and CEO, Marcegaglia,
said:
"We are proud to have a chance to contribute to the relaunch of
such a fundamental asset for the country, and look forward to
working with the trade unions and all other stakeholders. I am
confident that our consortium has all the attributes required to
deliver a successful turnaround, which will ensure Ilva makes a
positive contribution to the Italian economy, and each of the
communities in which it operates."
The agreement is subject to, and will become effective upon, the
satisfaction of certain conditions precedent, including information
and consultation requirements. The actual sale, and payment of the
full purchase price, is subject to the lifting of seizures against
certain Ilva assets by the Court of Taranto. The asset sale, and
payment of the purchase price, will occur on the later date of the
conclusion of the two-year lease period and the lifting of the
seizure of certain assets by the Court of Taranto. Transaction
closing is also subject to EU merger control approval.
ENDS
ArcelorMittal will hold a conference call hosted by Lakshmi N.
Mittal, Chairman and CEO, and Aditya Mittal, CEO of ArcelorMittal
Europe and group CFO to discuss the agreement to acquire Ilva on
Monday 19 June at 3:30pm CET (2:30pm UK time and 9:30am US eastern
time). The dial in numbers are:
Location |
Toll free |
Toll |
Participant
Code |
UK |
0800 051 5931 |
+44 203 364 5807 |
31204846# |
US |
+1 866 719 2729 |
+1 240 645 0345 |
31204846# |
France |
0800 914780 |
+33 1 7071 2916 |
31204846# |
Germany |
0800 965 6288 |
+49 692 7134 0801 |
31204846# |
Spain |
90 099 4930 |
+34 911143436 |
31204846# |
Luxembourg |
800 26908 |
+352 27 86 05 07 |
31204846# |
A replay of the conference call will be available for one week
by dialing +49 (0) 1805 2047 088, access code 509823#.
About ArcelorMittal
ArcelorMittal is the world's leading steel and mining company,
with a presence in 60 countries and an industrial footprint in 18
countries. Guided by a philosophy to produce safe, sustainable
steel, we are the leading supplier of quality steel in the major
global steel markets including automotive, construction, household
appliances and packaging, with world-class research and development
and outstanding distribution networks.
Through our core values of sustainability, quality and
leadership, we operate responsibly with respect to the health,
safety and wellbeing of our employees, contractors and the
communities in which we operate.
For us, steel is the fabric of life, as it is at the heart of
the modern world from railways to cars and washing machines. We are
actively researching and producing steel-based technologies and
solutions that make many of the products and components people use
in their everyday lives more energy efficient.
We are one of the world's five largest producers of iron ore and
metallurgical coal. With a geographically diversified portfolio of
iron ore and coal assets, we are strategically positioned to serve
our network of steel plants and the external global market. While
our steel operations are important customers, our supply to the
external market is increasing as we grow.
In 2016, ArcelorMittal had revenues of $56.8 billion and crude
steel production of 90.8 million tonnes, while own iron ore
production reached 55.2 million tonnes.
ArcelorMittal is listed on the stock exchanges of New York (MT),
Amsterdam (MT), Paris (MT), Luxembourg (MT) and on the Spanish
stock exchanges of Barcelona, Bilbao, Madrid and Valencia (MTS).
For more information about ArcelorMittal please visit:
http://corporate.arcelormittal.com/
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