Engagement on Potential Sale

Recently, Ondra Otradovec, overseeing mergers and acquisitions at ArcelorMittal SA, has initiated discussions in South Africa regarding the potential sale of the steelmaker’s local subsidiary. Sources familiar with the matter suggest that these conversations have progressed significantly.

Involvement of Key Institutions

Otradovec’s visit is seen as a pivotal moment for negotiations between the Luxembourg-headquartered company and the Industrial Development Corp. (IDC). The Department of Trade, Industry and Competition also has a role in these ongoing discussions, emphasizing the importance of this transaction.

Financial Considerations

The IDC had recently completed a due diligence assessment of ArcelorMittal South Africa Ltd. (Amsa) and is exploring a bid totaling around 8.5 billion rand (approximately $488 million), which encompasses the company’s existing debts. They are also actively seeking a financial partner to collaborate on the bid.

Impact on Operations

In November 2023, Amsa announced the impending closure of two steel mills, affecting critical outputs for the local automotive and mining sectors. The IDC, which owns about 8% of Amsa, has been negotiating with ArcelorMittal and governmental bodies to prevent these closures and provide financial support to keep operations running.

Employment and Economic Implications

These mills, located in Newcastle and Vereeniging, employ around 3,500 workers, impacting an additional 100,000 jobs in related industries. The closure would thus have significant ramifications throughout the regional economy.

Challenges Facing Amsa

Amsa has attributed the decision to close the mills to high electricity costs, inconsistent rail services, lower-priced imports, and government policies favoring local competitors with discounts on raw materials.

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Amsa’s Historical Context

The company, formerly Iscor Ltd., was taken over by Indian billionaire Lakshmi Mittal’s Mittal Steel Co. in 2003 and merged with Arcelor SA to create ArcelorMittal SA in 2006.

What are your thoughts on the potential sale, and how do you think it will affect the local economy? Feel free to share your insights!