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ArcelorMittal to Pay $2.2 Billion for Brazilian Steelmaker CSP

ArcelorMittal, itself created through one of steel industry’s biggest ever takeovers, has been a compulsive dealmaker under the leadership of billionaire Executive Chairman Lakshmi Mittal

THE CSP plant was built during the last decade by Vale, but was considered a non-core asset by the world’s second-biggest iron ore producer.
By Thomas Biesheuvel and Eddie Spence
July 28, 2022 | 08:32 am

Bloomberg — ArcelorMittal SA agreed to buy Brazilian steelmaker CSP from shareholders including Vale SA for $2.2 billion as the company continues to expand its operations in the Americas.

ArcelorMittal, itself created through one of steel industry’s biggest ever takeovers, has been a compulsive dealmaker under the leadership of billionaire Executive Chairman Lakshmi Mittal. In the past few years, it’s bought plants from the US to India and Italy.

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THE CSP plant was built during the last decade by Vale, but was considered a non-core asset by the world’s second-biggest iron ore producer. For ArcelorMittal, it provides a potential supply of steel slabs that can feed its plants in both North and South America. It can also be expanded to produce low carbon steel.

“In CSP, we are acquiring a modern, efficient, established and profitable business which further enhances our position in Brazil and adds immediate value to ArcelorMittal,” Chief Executive Officer Aditya Mittal said.

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The deal comes as ArcelorMittal posted second-quarter profit in line with analyst expectations and announced a new share buyback of $1.4 billion.

Second-quarter earnings before interest, taxes, depreciation and amortization were $5.2 billion, the steelmaker said in a statement on Thursday. ArcelorMittal shares rose as much as 5.2% in Amsterdam trading.

While earnings were resilient, the outlook for steel demand is dimming as Europe -- where ArcelorMittal has the bulk of its plants -- teeters on the brink of a recession. Surging energy costs are impacting builders and factories throughout the region, and the situation could take a turn for the worse if Russia further curtails supplies of natural gas.

“Inflationary pressures have escalated during 1H 2022 presenting significant headwinds to economic activity,” ArcelorMittal said Thursday. “The impacts on consumer and business confidence are leading to a slowdown in real demand, which has been exacerbated by destocking activity.”

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The company also cautioned that Europe’s worsening energy crisis posed uncertain risks to economic activity in the region.

What Bloomberg Intelligence Says:

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“ArcelorMittal’s acquisition of 3 million metric-ton a year Brazilian steel producer CSP is at a very competitive price, with the build cost of such a cost-competitive facility likely to be higher than the $2.2 billion acquisition price. The additional $1.4 billion share buyback announcement, on the back of strong results and a strong balance sheet, may also appease concerns that an acquisition spree could undermine shareholder returns.”

Read more at Bloomberg.com