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Steel Takeover Will Need Lenders Assistance

Steel Takeover Will Need Lenders Assistance

A multinational steel manufacturing corporation headquartered in Luxembourg has launched a bid to acquire an under pressure Italian steel facility but will need some financial help.

Hong Kong, July 22, 2016 — ArcelorMittal will have to fend off bids from two other companies who have their eye on the struggling Italian Ilva steel plant, arguably the biggest steel manufacturing facility on the continent.

The company, which was formed after a takeover in 2006 of Arcelor by Mittal steel, will have until June 30th to make a formal bid, however, they have asked for funding from state lender Cassa Depositi e Prestiti and CDP’s decision will dictate if the bid is successful.

The deal will also be subject to findings of a report by environmental regulators. Pollution has been a major concern and the government have been focused on that aspect after they took over administration of the plant in 2015 in an effort to save the 15,000 workforce.

Gary Chambers – Chief Investment Officer and Director of Corporate Trading at Fidea Wealth Management described the attempted takeover as “tactical” in a note to clients on Tuesday.

“Ilva is a massive undertaking and it’s no surprise they need some hefty financial backing to pull this off. The plant has been running at a loss for several years now and this can be seen as a tactical acquisition. It’s one for the future,” Chambers said.

It is also apparent that ArcelorMittal will partner with Marcegaglia, one of Italy’s biggest steel corporations, should CDP drop out of the deal. In that event Marcegaglia would take a 20 percent share of Ilva and ArcelorMittal would take the remaining.

CDP are also in talks with the two other bidders, Arvedi founded by legendary tycoon Giovanni Arvedi, and Turkish outfit Erdemir.

In an effort to attract sufficient interest, Ilva have been streamlining their operations by cutting down on employees and salaries, and also taking out a massive loan to fund an enforced environmental project near the facility.

Kazuko Rei
Fidea Wealth Management
Tokyo, Japan

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