Articles in Category: M&A Activity

Following the collapse of Greensill Capital in March 2021 many expected Sanjeev Gupta’s GFG Alliance metals empire to follow close behind. MetalMiner wasn’t alone in repeatedly questioning the murky financial structure of the sprawling group. Some media outlets suggested it reflected fraud bordering on a ponzi scheme. To most parties’ surprise, GFG has limped on for the last eleven months since Greensill’s collapse.

UK’s third largest steel producer

The temporary UK government moratorium bankruptcy proceedings due to the pandemic, only expired late last year. Surprisingly, the coup de grâce comes not from the aggrieved trade creditors, but from the British Government. In other words, the taxman has come to collect. Her Majesty’s Revenue & Customs (HMRC) has tried to force four companies in Sanjeev Gupta’s UK steel empire, into insolvency. This threatens the employment of close to 2000 people. This move could bring to an end Britain’s third largest steel producer. Although precise figures remain uncertain, the debts to the tax authorities alone run into tens of millions of pounds. £27m ($36.56m) one source suggested, with another investigation gathering speed into alleged fraudulent accounting at a sister enterprise, Liberty Commodities.

Tough pill to swallow for British steel-making

The move to shut down UK divisions of Gupta’s empire lands a tough blow for UK steel making in general. The companies involved all produce high-grade anti corrosion steels used in the oil and gas industry and aerospace.  This alone makes them valuable assets in a country with precious little steelmaking left. According to a post in the Guardian newspaper, the four companies having action taken against them include:

  • Liberty Merchant Bar at Scunthorpe in North Lincolnshire.
  • Speciality Steel UK, which employs close to 2,000 people at Rotherham and Stocksbridge in South Yorkshire.
  • Liberty Performance Steels Ltd at West Bromwich in the West Midlands
  • Liberty Pipes at Hartlepool in County Durham

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GFG Alliance has already sold or shuttered numerous companies in a desperate scramble to shore up its finances. Greensill Capital’s failure has also limited GFG’s ability to replace them. That failure says something about the quality of the group’s financial position. Some standalone companies such as car parts maker Liberty Aluminium Technologies (LAT) in the UK and steel companies in Europe have found buyers. But the remaining divisions have not found backers. The giant Aluminium Dunkerque operation reached a re-financing agreement with American Industrial Partners Capital Fund. Late last year however, AIP took title to the plant.

The end of the road for GFG and Liberty Steel?

Does this mark the last chapter of GFG and Liberty Steel? Perhaps it seems a little too early to write off Gupta. He is after all, a survivor.  However, if he manages to hold his dwindling empire together, the result may only look like a shadow of its former self.

 

Before the weekend, let’s take a look back at the week that was and the metals storylines on MetalMiner:

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lithium-ion battery

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Week of Aug. 23-27 (lithium-ion battery challenges, Chinese steel merger and much more)

  • Chinese steelmakers Ansteel and Ben Gang will merge to form the world’s third-largest steelmaking company.
  • Global copper mine production rose by 4.8% through the first five months of the year.
  • Stuart Burns on the technological challenges posed by lithium-ion batteries.
  • Steel capacity utilization rose to 85.0% last week.
  • Norsk Hydro said it will expand capacity at its aluminum extrusion plant in Sjunnen, Sweden.
  • Sohrab Darabshaw took a look at Afghanistan’s rare earths and potential investments on the heels of the U.S. military’s pullout from the country.
  • U.S. steel imports rose by 17.4% through the first seven months of the year, the American Iron and Steel Institute reported.
  • Global aluminum production picked up in July, the International Aluminum Institute reported.
  • U.S. steel imports picked up in July, paced by a jump in imports of blooms, billets and slabs.
  • Norsk Hydro said it will extend its partnership with Equinor and Panasonic to explore the formation of a joint European battery business.
  • Global steel production fell on a month-over-month basis in July, marking the second straight month of declines.
  • Rio Tinto announced it had resumed negotiations with the union representing workers at the BC Works aluminum smelter.

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This morning in metals news: two Chinese steelmakers are merging to form the world’s third-largest steelmaker; the LME aluminum price lost some ground last week; and, lastly, July construction employment continued to lag in the U.S.

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Major Chinese steelmakers merge

China map

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Two Chinese steelmakers are merging to form the world’s third-largest steelmaking company, state-run news outlet Xinhua reported Friday.

Ansteel and Ben Gang Group Corporation signed a merger deal Friday, Xinhua reported.

Ansteel will have annual production capacity of 63 million metric tons after the merger. Furthermore, the firm is targeting capacity of 70 million metric tons of crude steel by 2025.

Aluminum price dips

Meanwhile, aluminum prices remain elevated, but they took a step back last week.

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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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Week of Aug. 16-20 (shipping sector disruptions, Chinese steel prices and more)

Shipping

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Continuing with its acquisition of the U.S. natural gas assets, the Bangkok-based Banpu has now agreed to purchase a combined cycle gas-fired power plant in Texas.

According to Forbes , Banpu, controlled by billionaire Isara Vongkusolkit, will buy the power plant for U.S. $430 million.

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Banpu looks to the future

mergers and acquisitions

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For some time now, Banpu has been investing in sustainable projects as it steers a new course.

Last year, it established Banpu Next, which includes its energy technology businesses. Those include electric vehicles, renewable energy plants and electric ferries.

The company may not exit the coal mining business altogether for another decade or so because of the continued demand for coal. However, it has said it will no longer invest in new coal assets, preferring to put money into renewable energy.

In an interview with CNBC, Chief Executive Somruedee Chaimongkol — sometimes referred to as “Asia’s first lady of coal” — said the firm wanted to make half of its earnings from green energy by 2025.

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This morning in metals news: Nucor Corporation today announced it will acquire Cornerstone Building Brands‘ insulated metal panels business; the oil price approached $70 per barrel to close last week; and the aluminum price has retraced over the last month.

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Nucor to acquire insulated metal panels business

mergers and acquisitions

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Nucor announced today that it plans to acquire the insulated metal panels business of Cornerstone Building Brands.

The acquisition comes at a cash purchase price of $1 billion. Nucor said it expects the transaction to close later this year, pending regulatory approvals.

“Today’s announcement accelerates our vision to broaden value-added solutions that Nucor provides to our targeted end markets. Additionally, it enhances our strong financial position with attractive free cash flow conversion rates and accretive EBITDA margins,” Nucor President and CEO Leon Topalian said. “We are excited about this opportunity to acquire a historical leader and innovator in the quickly growing IMP product category serving the non-residential market.”

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ArcelorMittal is eyeing the potential acquisition of Liberty Steel France, which includes a steelmaking plant at Ascoval and rail rolling mill at Hayange, a source within the Luxembourg-headquartered company told MetalMiner.

“We were interested last year, when they were available,” the source said.

ArcelorMittal logo

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Bids are due for assessment likely in July, the source added.

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ArcelorMittal strategy

One analyst expressed his surprise on ArcelorMittal’s interest in those plants. In February, the steelmaker announced financial results for 2020, stating that its strategy would be to focus on organic growth.

ArcelorMittal also rolls rails in Europe at Gijón in Spain and Luxembourg’s Rodange mill. It also does so in Poland at the Dąbrowa Górnicza and Królewska sites.

The financial difficulties that Liberty’s parent company GFG Alliance now faces could possibly allow ArcelorMittal to acquire the assets at lower prices, the analyst added.

Rothschild & Co (Paris) is managing sale of the assets on Liberty’s behalf, a spokesman for the steelmaking group told MetalMiner in an email.

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This morning in metals news: Barksdale Resources announced it will acquire 100% of the Sunnyside copper-lead-zinc-silver project in Arizona; meanwhile, Cleveland-Cliffs signs have gone at the former ArcelorMittal Burns Harbor steel mill; and, lastly, the Biden administration has approved the first large-scale offshore wind power project in US waters.

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Barksdale to acquire Sunnyside project

mining

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Vancouver-based Barksdale Resources Inc. announced it will acquire 100% of the Sunnyside copper-lead-zinc-silver project in Arizona from Regal Resources Inc.

“The Transaction allows Regal shareholders to participate in a larger, more liquid company that not only holds the consolidated Sunnyside project, but also the 100% owned San Antonio, Goat Canyon, and Canelo copper porphyry exploration projects near Sunnyside as well as the San Javier copper-gold project in Sonora, Mexico,” Barksdale said in a release.

The transaction still requires regulatory approval, in addition to approval by Regal shareholders.

Cliffs signs up at Burns Harbor mill

In December, Cleveland-Cliffs closed on its acquisition of most of ArcelorMittal’s North American assets.

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ThyssenKrupp

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ThyssenKrupp has ended discussions with London-based Liberty Steel over the potential sale of the German conglomerate’s steel unit.

The parent company made the announcement Wednesday evening, Feb. 17.

“We opened the door for negotiations, but in the end our ideas about the corporate value and the structure of the transaction were far apart,” ThyssenKrupp Chief Financial Officer Dr. Klaus Keysberg said.

Keysberg added ThyssenKrupp regrets the decision because it perceived Liberty Steel “as a serious partner in the process.”

“There was a close exchange between ThyssenKrupp and Liberty Steel on a number of complex topics. As a result, however, no common solution could be found for key requirements addressed by ThyssenKrupp,” the group also stated.

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ThyssenKrupp, Liberty talks end

ThyssenKrupp had sought approximately €1.5 billion ($1.8 billion) for its steel assets. Liberty, however, wanted either to acquire it for nothing or receive extra payment with it, one industry watcher in Germany said.

Liberty Steel officials were also unavailable for comment. A ThyssenKrupp spokeswoman declined to comment beyond the group’s original statement.

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ArcelorMittal sign in Ontario

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Impacts from the COVID pandemic and asset sales saw ArcelorMittal report a 20.4% decline in its crude steel production in 2020.

“The countries worst affected by COVID were the ones that saw drops in their production,” one industry watcher added about lower production at the group’s assets in Europe, Brazil and the United States.

ArcelorMittal output down 20.5%

ArcelorMitttal poured a total 71.5 million metric tons of liquid steel in the 12 months of 2020. Meanwhile, it poured almost 90 million metric tons in 2019, the group noted Feb. 11.

Shipments for the year came to 69.1 million metric tons, down 18.2% year on year from 84.5 million metric tons, ArcelorMittal added.

The Europe segment recorded a decline of 22.6% to 34 million metric tons from almost 44 million metric tons. Meanwhile, shipments in that segment fell to 32.8 million metric tons. That total marked a decline of 22.5% from 42.3 million metric tons.

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Demand boost

Improved demand from the automotive and manufacturing sectors pushed up crude production in the last quarter of 2020. Q4 2020 production rose by over 15% to 9.11 million metric tons from the 7.9 million metric tons produced in Q3.

Overhaul of a blast furnace in Belgium, however, offset that increase.

“Although the company has restarted capacity, some steel-making capacity during [Q4] remained idled, including a blast furnace at Ghent, Belgium, that is due to restart mid-February 2021 following a planned major reline,” the group said.

Higher flats demand also helped to boost quarter-on-quarter shipments 4.7% to 8.6 million metric tons from 8.2 million metric tons, ArcelorMittal added.

The December sale of ArcelorMittal USA to Cleveland Cliffs pushed down crude production in North America 18.7% to 17.8 million metric tons from almost 22 million metric tons, the group said.

Shipments for the year were down to 9.41 million metric tons, the group noted, reflecting a 15.9% decline from almost 11.2 million metric tons.

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