Articles in Category: M&A Activity

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This morning in metals news, U.S. Steel announced a new joint venture with Big River Steel, the E.U.-U.S. fight over aircraft subsidies continues and Chile’s copper output increased in August.

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U.S. Steel to Purchase 49.9% Interest in Big River Steel

U.S. Steel announced Tuesday it will purchase a 49.9% ownership interest in the Arkansas-based Big River Steel, a purchase coming with a $700 million price tag.

“Our new partnership with Big River is designed to accelerate our strategy to offer our customers the ‘best of both’ by bringing together the capabilities of integrated and mini mill steel production,” U.S. Steel President and CEO David B. Burritt said. “Big River operates the most advanced, state-of-the-art and sustainable mill in North America, and our investment would ultimately strengthen our competitive positioning in highly strategic steel-end markets, creating an unmatched value proposition for our stakeholders.”

U.S. Steel said the acquisition allows it to reshape its footprint in its flat-rolled segment “to create a more nimble, agile and customer-focused organization with new presence to serve growing U.S. and Mexico markets.”

E.U. Prepares for U.S. Tariffs in Airbus Saga

According to Phil Hogan, who will soon succeed Cecilia Malmstrom as E.U. trade commissioner, the E.U. “has to stand up for itself” in the ongoing battle with the U.S. over aircraft subsidies, CNBC reported.

The ongoing saga between the U.S. and the E.U. over aircraft subsidies to Boeing and Airbus, respectively, has dragged on for well over a decade and could soon be coming to a financial conclusion after moving through the notoriously slow-moving World Trade Organization (WTO) dispute settlement system.

The United States Trade Representative has proposed $11 billion in tariffs in retaliation against the E.U.’s subsidization of Airbus.

A World Trade Organization (WTO) ruling is expected soon regarding the scope of tariffs the U.S. will be permitted to apply.

Chile’s Copper Output Jumps in August

While the International Copper Study Group recently reported global copper production was down through the first half of the year, production in No. 1. producer Chile increased in August, Reuters reported.

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According to Reuters, Chile’s copper production surged 11% year over year in August.

Source: World Gold Council

This morning in metals news, the World Gold Council unveiled a set of principles geared toward promotion of responsible mining, Apple’s newest iPhone includes stainless steel and an Indian steel tycoon is critical of the pace of the country’s insolvency proceedings.

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World Gold Council Launches Set of Principles for Responsible Gold Mining

The World Gold Council this week announced the launch of responsible gold mining principles that it says will offer a “new framework that set out clear expectations for consumers, investors and the downstream gold supply chain as to what constitutes responsible gold mining.”

The principles are divided into three categories: governance, social and environment.

“It is our aim that these Principles will become a credible and widely recognised framework through which gold mining companies can provide confidence that their gold has been produced responsibly,” the World Gold Council said. “The Responsible Gold Mining Principles are intended to recognise and consolidate existing standards and instruments under a single framework.”

Newest iPhone Includes Stainless Steel

Apple announced this week that its newest iPhone model, the iPhone 11, will be available in stores Sept. 20.

From a metals perspective, the new phone, which features a a triple-camera system, is made of glass and stainless steel.

“iPhone 11 Pro and iPhone 11 Pro Max have a textured matte glass back and polished stainless steel band, and come in four stunning finishes including a beautiful new midnight green,” Apple said in a release.

Indian Steel Tycoon Critical of Insolvency Proceedings

Indian steel tycoon Sajjan Jindal, head of the JSW Group, panned India’s relatively new bankruptcy and insolvency program on the grounds that it has been slow-moving.

Jindal’s JSW Group put in a $2.7 billion bid for the bankrupt Bhushan Power and Steel in February 2018, but only received approval by an Indian court last week, the Financial Times reported.

Since then, the steel tycoon’s interest in the acquisition has “definitely receded,” he told the Financial Times.

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The country’s Insolvency and Bankruptcy Code, initiated in 2016, aimed to streamline the process by resolving an insolvent business within 270 days; however, as the Financial Times noted, insolvency cases in the country have extended past the mandated 270-day deadline.

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This morning in metals news, a workers’ strike came to an end at top copper producer Codelco’s Chuquicamata mine in Chile, South Korean steelmakers Posco and Hyundai Steel are facing government shutdown orders at some locations over emissions, and the liquidated British Steel has attracted some interest before a June 30 bid deadline.

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Strike Ends at Chuquicamata

A workers’ strike at Codelco’s Chuquicamata mine came to an end this week as workers voted to accept an offer from the company, Reuters reported.

The unions at the mine rejected a proposal from the company last weekend, as the strike dragged on for two weeks.

(MetalMiner’s Stuart Burns weighed in on the Chuquicamata strike yesterday.)

Posco, Hyundai Face Shutdowns

South Korean steelmakers Posco and Hyundai could see some of their furnaces shut down by government actions aimed at curbing emissions, the Nikkei Asian Review reported.

In fact, according to the report, one-third of the blast furnaces in the country are facing 10-day shutdown orders from the government.

Interest Comes in for British Steel

The previously set June 30 bid deadline for British Steel is fast approaching, and up to nine entities have expressed interest, Reuters reported.

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The steelmaker went into liquidation last May after it failed to secure a second government loan to continue its operations. The firm was owned by Greybull Capital, which purchased it from Tata Steel in 2016 for a nominal £1.

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The European Commission has approved a bid from Liberty House Group to purchase a number of ArcelorMittal’s European steelmaking assets.

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“The assets form a divestment package the Company agreed with the European Commission (‘EC’) during its merger control investigation into the Company’s acquisition of Ilva S.p.A.,” ArcelorMittal said in a release.

The assets included in the divestment package are: ArcelorMittal Ostrava (Czech Republic), ArcelorMittal Galati (Romania), ArcelorMittal Skopje (Macedonia), ArcelorMittal Piombino (Italy), ArcelorMittal Dudelange (Luxembourg) and several finishing lines at ArcelorMittal Liège (Belgium).

Transaction closing is “anticipated to occur before the end of the first half of this year,” ArcelorMittal said.

Liberty House Group, headquartered in London and part of the GFG Alliance (led by Executive Chairman Sanjeev Gupta), announced plans to consolidate its global steel assets.

“Following EU approval today for Liberty to acquire seven major European steel plants from ArcelorMittal, the GFG Alliance has announced its intention to integrate most of its Liberty steel, engineering and mining businesses into a single global entity, spanning assets across the UK, Europe and Australia,” the firm said in a release.

“The consolidated business will include all of the UK steel and engineering assets, the integrated Australian Liberty primary steelworks in Whyalla, a number of high-quality Australian iron ore and metallurgical coal mines,  and, once completed, the seven European steel plants being acquired from ArcelorMittal. This merged new group would exclude GFG’s recycling and building products businesses in Australia and the USA.”

Gupta touted the move’s impact on Liberty’s reach.

“We are delighted that the EU has validated Liberty as a suitable buyer for these European steel assets,” Gupta said. “This will make us the third largest steel producer in Europe. We are an ambitious and aspirational group and we keep breaking boundaries. The bringing together of our international integrated steel assets is part of our deliberate, strategic and sustainable expansion.”

Liberty House has been busy on the acquisitions trail over the past year.

In December, Liberty completed the $500 million acquisition of Rio Tinto’s Dunkerque aluminum smelter in France, which Gupta called a “real milestone” in Liberty’s “European investment journey.”

In addition, in January Liberty Steel USA announced the acquisition of Dallas-headquartered Keystone Consolidated Industries (KCI) for $320 million.

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“KCI will be combined with Liberty Steel Georgetown to give Liberty Steel USA a total of up to 1.8m tons per annum of EAF melting capacity, 2m tons per annum of wire rod rolling capacity, significant value-added downstream businesses and over 1,300 employees,” the firm said in a release at the time. “The combined company will have operations in Illinois, Ohio, South Carolina, New Mexico, Texas and Georgia.”

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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This morning in metals news, the Wall Street Journal reported the Brazilian government plans to file charges in relation to the fatal Vale SA tailings dam collapse earlier this year, Tata Steel’s European workers are having doubts about the proposed Thyssenkrupp merger, the U.S. and China reportedly made a breakthrough this week in their ongoing trade talks.

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Brazil to File Charges After January’s Dam Collapse

The Wall Street Journal this week reported the Brazilian government plans to file charges in connection with the collapse of one of miner Vale SA’s tailings dams in January (which left hundreds dead).

The collapse occurred in late January at Vale’s Corrego do Feijao mine in Brumadinho, located in the southeastern state of Minas Gerais.

Second Thoughts

Some Tata Steel employees in Europe are questioning the balance of the planned merger with German firm Thyssenkrupp, Bloomberg reported.

The merger, which is under review by Europe’s competition authorities, would yield Europe’s second-largest steelmaking entity.

“The EWC will continue to support the joint venture only if we consider it to be in the best interests of the workforce at all our sites,” Tata’s work council said in a statement, as quoted by Bloomberg. “Due to these recent developments, we are now unconvinced the joint venture is the best option for Tata Steel Europe.”

U.S.-China Trade Talks

Trade talks between the U.S. and China continued this week, as the two sides aim to reach a resolution to the conflict that boiled over last year to the tune of a total of $360 billion in tariffs on each other’s goods.

The question for many, however, has been about enforcement — whatever deal was reached on paper, the U.S. has sought assurance of compliance.

In that vein, this week the two sides reached an agreement regarding the setup of trade enforcement offices.

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“We’ve pretty much agreed on an enforcement mechanism,” U.S. Treasury Secretary Steven Mnuchin said on CNBC, as quoted by Bloomberg. “We’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters. So this is something that both sides are taking very seriously.”

Steel tycoon Lakshmi Mittal’s dream of re-entering the Indian steel market is about to come true.

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After almost a year of legal tussles, the National Company Law Tribunal (NCLT), Ahmedabad bench, gave the green light to ArcelorMittal’s resolution plan for the debt-laden Essar Steel Ltd. The latter was put on the block after lenders asked the court to recover about U.S. $7 billion in dues.

The approximately U.S. $5.9 billion acquisition of the distressed plant, though, has run into one more road block.

Essar Steel Ltd’s ex-promoter Prashant Ruia and two other directors of the erstwhile board of the steelmaker have approached the National Company Law Appellate Tribunal (NCLAT) to thwart the move.

Standard Chartered Bank, a dissenting bank among the Committee of Creditors (CoC) of Essar Steel, has challenged the NCLT’s order.

The bank’s contention was the resolution plan approved by the CoC of Essar Steel favored the secured creditors.

In late January, the same Tribunal had rejected a full debt settlement proposal by shareholders of Essar Steel, ruling that the offer violated Section 12A of the Insolvency and Bankruptcy Code (IBC), which says the promoters can reclaim a company from bankruptcy by paying full settlement, but not after others have submitted their expressions of interest.

This is one more hurdle that Mittal will now have to overcome to take over the mill, which boasts an annual capacity of 10 million metric tons.

A joint venture between Japan’s Nippon Steel & Sumitomo Metal Corp. with ArcelorMittal has offered an upfront cash settlement of about U.S. $ 1 billion and a multimillion-dollar capital infusion as part of the acquisition process.

ArcelorMittal SA is the world’s largest steel company by volume but doesn’t have a steel plant yet in India. Once the formal acquisition is done, Essar Steel’s capacity will immediately make ArcelorMittal the fourth-biggest player in India. The Essar plant is operating at much lower capacity; experts say will need a large influx of funds to run at capacity.

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ArcelorMittal has a presence in 60 countries and an industrial footprint in 18 countries. Mittal has made several attempts in the past to get into the Indian market, but none bore fruit.

In 2010, the company signed an agreement with the Karnataka provincial government to set up a 6 million ton per annum capacity plant, but the land acquisition process itself has taken about eight years.

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This morning in metals news, U.S. Steel announced the restart of construction on an electric arc furnace (EAF) facility, a new £35 million research network aims to make the U.K.’s steel sector carbon-neutral and the latest on the Thyssenkrupp-Tata joint venture.

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An EAF Restart

U.S. Steel announced Monday that it would restart construction on an EAF facility in Fairfield, Alabama.

Per the steelmaker’s announcement, completion of the construction is expected to cost $215 million and will add about 150 jobs.

Research Network Aims for Carbon-Neutral U.K. Steel Sector

A new research network aims to make the U.K.’s steel sector carbon-neutral by 2040, according to the BBC.

Per the report, Swansea, Sheffield and Warwick universities will work together in a £35 million project in an effort toward the carbon-neutral goal.

A Warning for Thyssenkrupp-Tata

As the proposed Thyssenkrupp-Tata Steel joint venture is analyzed by Europe’s competition authorities, one report offers not-so-positive news for the firms.

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According to Reuters, the companies will be warned this week that their joint venture — which would create Europe’s second-largest steelmaker — could be vetoed by Europe’s antitrust regulators unless they offer concessions.

Last year was a big one for a M&A activity in the world of metals.

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According to a report released yesterday by PwC, the total value of metals M&A deals in 2018 hit $53.4 billion — up from $28.1 billion in 2017 — paced by a trio of megadeals (deals of $5 billion or greater).

However, drilling deeper into the numbers and happenings of 2018, the report states political conditions impacted the metals M&A climate.

“While these megadeals drove increased average deal size, the various tariffs imposed on and impacting steel and aluminium (and other downstream products) may have negatively impacted M&A momentum,” the PwC report states. “This may be evidenced by overall deal volume declining in 2018 and favoring within-border transactions compared to 2017. While likely only temporary, the uncertainty caused by the heated geopolitical climate may impact M&A into 2019.”

Average deal size, at $160.5 million, was up 113% from 2017, but down 62% in Q4 2018 compared with Q3 2018.

Deal volume, however, at 163 in 2018, marked a 9% drop from the previous year, and an 18% drop in Q4 from the previous quarter.

The biggest deal of the year was the $6.5 billion purchase of Essar Steel by a joint venture led by ArcelorMittal, as the former had been subject to bankruptcy proceedings under India’s Insolvency and Bankruptcy Code.

Meanwhile, Siyuanhe Iron & Steel Industry Development Equity Investment Fund’s acquisition of Chongqing Changshou Iron & Steel Co. Ltd. for $662.6 million was the largest deal of Q4 2018.

By metal, steel deals accounted for 51% of total deal value in 2018, according to the report, as well as 44% of deal volume.

By region, Asia and Oceania was the most active ground for M&A activity last year, accounting for 68% of total deal value (North America came in second at 22%) and 56% of deal volume.

Speaking to China, specifically, PwC forecasts steel sector consolidation to continue this year.

“While Asia has seen the most M&A activity, the Chinese steel industry continues to struggle with overcapacity and is likely to witness more consolidation in 2019, as the government aims to put 60% of its national steel capacity in the hands of its top ten (mostly state-owned) producers by 2020; up from 33% presently,” the report states.

According to the World Steel Association, China’s crude steel production hit 77.6 million tons in November, up 10.8% year over year despite the start of production curbs for the winter heating season.

PwC cites trade talks between the U.S. and China and the potential ratification of the United States-Mexico-Canada Agreement (USMCA) as factors that could engender a climate of increased M&A activity in 2019.

“The geopolitical climate and continued uncertainty, on the other hand, could lead to companies slowing M&A activity in 2019 and taking time to review their portfolios amidst the uncertainty,” PwC states in its report. “This may lead to an increase in divestitures, which could provide value for both strategic and financial buyers. Other hurdles which may impact M&A activity into 2019 include investor reservations surrounding Brexit (trade relations between the UK and the EU) and the looming United States elections in 2020.”

While there has been some minimal progress between the U.S. and China, the world’s top two economies still appear to be far apart on a number of issues (as MetalMiner’s Stuart Burns posited yesterday). President Donald Trump and President Xi Jinping held talks during the Group of 20 summit in Argentina (held Nov. 30-Dec. 1) and an additional round of talks were held Jan. 7-9 in Beijing. However, another round of talks, which would have brought Chinese officials to Washington, D.C., appears to have fizzled out, according to media reports.

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Should the parties not reach a deal by March 1, the U.S.’s delayed tariff hike — from 10% to 25% on $200 billion worth of Chinese imports announced in September — would likely go into effect, again injecting uncertainty and shaking investor confidence.

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This morning in metals news, the aluminum price slides to a 16-month low, Liberty House could be looking to expand its presence in the Middle East and the mid-February deadline for the Section 232 auto investigation draws nearer.

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Aluminum Drops Post-Sanctions Delisting

The aluminum price continued to fall Monday after last week’s announcement on the delisting of previously sanctioned Russian companies.

According to Reuters, the LME aluminum price dropped 0.5% Monday, continuing the decline after the price hit a 16-month low last week.

Liberty House Continues on the Acquisitions Trail

As we noted last week, Liberty House recently acquired miner Rio Tinto’s Dunkerque aluminum smelter, as Sanjeev Gupta’s GFG Alliance continues to snap up assets.

According to a report in The National, the steel tycoon could now be turning to the Middle East, specifically the U.A.E.

According to the report, which cites a Liberty House official, the company is in talks to buy steel and aluminum assets in the country.

Section 232 Auto Probe Deadline Inches Closer

The Trump administration’s Section 232 investigation of steel and aluminum import levels came to a close in the spring with much fanfare, yielding blanket tariffs of 25% and 10%, respectively.

However, the administration didn’t stop using Section 232 then and there, as it launched yet another 232 probe in May, this time looking into imports of automobiles and automotive parts.

The law requires Secretary of Commerce Wilbur Ross to present a report to the president within 270 days after the launching of a 232 investigation, making for a mid-February deadline.

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In an interview with the Financial Times, Ross said his report is still a “work in progress” but also noted the president’s flexibility in terms of what he can do with respect to potential automotive tariffs.

The recently signed United States-Mexico-Canada Agreement (USMCA), inked during the Group of 20 summit in Argentina, included stricter auto content rules for tariff-free vehicle trade. The new trade agreement bumps the automotive content threshold from 62.5% to 75%. In addition, USMCA included a provision that 40-45% of auto content must be produced by workers making a minimum of $16/hour.