Steel company ArcelorMittal and Marcegaglia say that that AM Investco Italy Srl 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 for €1.8 billion.
The formal documents should be completed by 30 June. Intesa Sanpaolo will join the consortium before the transaction is closed. The assets will be transferred to AM Investco free of long term liabilities and financial debt and includes €1 billion of net working capital.
ArcelorMittal says that the agreement provides a unique opportunity to acquire Europe’s largest steelmaking site in Europe’s second-largest steel market.
The company proposes a robust investment plan to improve the acquisition’s environmental footprint and realise its full potential, and has identified synergies of €310 million to be achieved by 2020. llva is expected to show EBITDA growth in its first year, and free cash flow growth by year three.
The annual leasing costs of €180 million areto 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. The lease period is expected to start around the end of this year, subject to regulatory authorisations for a minimum of two years.
Investments of around €2.4 billion (€2.1 billion net of Riva Group contribution) will be made over a seven-year period, with a capital expenditure of around €1.3 billion on industrial investment including blast furnaces, steel shops and finishing lines. An environment investment of €1.1 billion is anticipated to ensure that llva complies with the Integrated Environmental Authorisation Act.
There will be an additional €10 million start-up investment in a 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.
llva is expected to add significant value to ArcelorMittal’s European business. It is the second-largest and only integrated steelmaker in Italy, whose main production facility in Taranto is well-located next to one of Europe’s largest deep-water ports. It also has significant steel-finishing capacity in nearby Taranto, Novi Ligure, and Genoa.
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,” said Lakshmi N. Mittal, chairman and CEO of ArcelorMIttal.
“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.”
