ArcelorMittal SA to sell Macsteel stake

The proceeds of the sale will be used to fund working capital requirements and investments in the operating businesses.

ArcelorMittal’s South Africa unit will sell its 50 per cent stake in trading and shipping company MIHBV to its joint venture partner Macsteel Holdings Luxembourg (MacHold) for $220 million, the steel maker said recently. The proposed transaction, which is subject to several conditions, will be consummated through a sale of shares agreement. One of the conditions includes AMSA and MIHBV entering into a four-year marketing agreement following the transaction.

AMSA has been hinting at a sale of MIHBV for several months, owing to balance sheet pressures at the JSE listed company, which has failed to deliver a profit since 2010. Last year, the JSE listed steelmaker declared a headline loss of R2.52 billion for the year to December 31, 2017, having reported a loss of R2.59 billion in 2016. During 2017, AMSA’s net borrowings also surged to R3.2 billion from R290 million in the previous year.

“The proceeds of the sale will significantly strengthen the balance sheet of ArcelorMittal South Africa and will be used to fund working capital requirements and investments in the operating businesses,” ArcelorMittal SA Chief Executive Kobus Verster said in a statement.

MacHold already holds a 50 per cent stake in MIHBV, which is engaged in steel trading and shipping. The other 50 per cent is held by ArcelorMittal SA.

“In the early years, most of the steel for the joint venture was sourced from ArcelorMittal South Africa. Today, while it remains an important source of steel products, ArcelorMittal SA supplies less than 20 per cent of the total tonnages traded and less than two per cent of volumes shipped by MIHBV,” said Verster.

“The investment is no longer considered to be a core asset and we have decided to dispose of our interest,” he said.

AMSA is also assessing prospects for the sale of other noncore assets, including Consolidated Wire Industries. However, it has no intention of exiting its core steelmaking operations at Vanderbijlpark, Newcastle and Saldanha Bay.

Last year, the company initiated discussions with its employees in relation to the redeployment of some staff from lossmaking operations to other parts of the business. The company employs around 13 000 people.