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EC approves Liberty House Group’s purchase of ArcelorMittal's divestment businesses

Steel News - Published on Thu, 18 Apr 2019

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The European Commission has approved, under the EU Merger Regulation, Liberty House Group as a suitable purchaser of several ArcelorMittal steel plants, sold under commitments made by ArcelorMittal in order to buy Ilva. The Commission has also approved the transaction itself under EU merger rules. The Commission has taken two decisions concerning the sale of these assets by ArcelorMittal to Liberty House Group:

It has found that Liberty House Group is a suitable purchaser of the ArcelorMittal assets, allaying the Commission's concerns in the European markets for hot rolled, cold rolled and galvanised flat carbon steel.

It has approved under the Merger Regulation Liberty House Group's acquisition of the assets sold by ArcelorMittal. The Commission concluded that there were no competition concerns, as there only are limited overlaps between the activities of Liberty House Group and the steel plants acquired.

In May 2018, the Commission approved the acquisition of Ilva by ArcelorMittal, subject to conditions. In particular, ArcelorMittal was required to sell a large package of steel plant assets to a suitable purchaser. The divestiture was proposed by ArcelorMittal to address the Commission's concerns regarding effective competition in European hot rolled, cold rolled and galvanised flat carbon steel markets. The package of assets that ArcelorMittal chose and committed to divest consists of a number of production sites throughout Europe. These include
An integrated steelworks in Galati, Romania
An integrated steelworks in Ostrava, Czech Republic
Finishing plants in Italy, Belgium, Luxembourg and North Macedonia

The divested production sites cover the whole value chain, from liquid steel manufacturing to the production of finished flat carbon steel products, including hot rolled, cold rolled and galvanised steel. Thus, the divestment includes not only finishing lines but capacity for the production of liquid steel at two integrated steelworks that are also able to expand their production.

The Commission initially had serious prima facie concerns about the proposal. In particular, in ArcelorMittal's initial submissions the acquisition was highly dependent on borrowed money, including from ArcelorMittal, and part of the purchase price was contingent on the assets' performance. Furthermore, certain assets that had to be divested under the Commitments had been carved out. Based on the Commission's investigation and feedback, ArcelorMittal made significant improvements during the review process that allowed the Commission to conclude that the sale would comply with the commitments ArcelorMittal gave to the Commission as a condition for approval to acquire Ilva. In particular:

The financing of the transaction has been significantly amended
(i) Liberty House Group will provide a higher amount of equity for the purchase, with the level of debt decreasing overall and as a proportion of the acquisition's price
(ii) ArcelorMittal will no longer provide Liberty House with finance for the steel plant purchases through vendor loan notes. As a result, the ability of the divested assets to sustain a downturn in the steel the industry is improved and the operation of the divested steel plants will not be dependent on ArcelorMittal's financing.

The terms under which the divestment businesses will source their steel substrate for a transitional period have been improved to become more favourable to the downstream steel processing plants. This is also meant to improve the long term viability of the divested steel plants.

Other assets, including all of the CO2 emission rights associated with the plants, are now included in the transaction.

Liberty House Group, registered in Singapore with headquarters in London, is a private group active in commodities, metals recycling, and the manufacture of steel, aluminium, and engineering products.

Source :

Posted By : Sanju Moirangthem on Thu, 18 Apr 2019
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