In a significant move, South Africa’s largest development finance entity has reached a preliminary agreement with ArcelorMittal SA for a takeover of the steel company’s South African division, reportedly valued at around R10 billion, according to sources familiar with the discussions.The offer from the Industrial Development Corporation includes approximately R3 billion in cash, along with an assumption of R7 billion in debt linked to ArcelorMittal, noted the anonymous sources due to the sensitivity of the information.
This deal represents one of the largest industrial interventions by the South African government in recent years, effectively bringing a significant industrial asset under the oversight of the state-owned IDC.
The aim is to finalize the transaction, pending a shareholder vote, by the end of the year, as mentioned by the insiders.
In response to the news, shares of AMSA, the abbreviation for the South African unit, jumped by as much as 21% during trading in Johannesburg, raising its market valuation to R1.3 billion.
A decade-long partnership with local Black economic partner Likamva Resources, which holds a stake in AMSA, is set to expire in early December, and it appears unlikely that it will be included in the new ownership structure, the sources indicated.
The South African government mandates large businesses to collaborate with Black-owned partners to help include the previously marginalized Black majority in the economy, which was significantly restricted during apartheid.
This acquisition of the country’s leading steel producer concludes talks that began in November 2023 when AMSA disclosed plans to close two steel mills producing vital grades for key sectors like automotive and mining.
The IDC, already invested in the business, along with South Africa’s trade and industry department, stepped in to assist an industry deemed crucial for the nation’s manufacturing framework.
AMSA has not provided any comments regarding the matter.
The IDC stated it is still in negotiations “to find a lasting solution to the challenges facing the steelmaker with the objective of protecting South Africa’s vital steel-manufacturing capabilities,” adding that further communications will follow with any developments.
A structured process will be adhered to facilitate the successful completion of this transaction, according to the sources.
Once the deal is finalized, the development financier will initiate a strategic assessment of the operations and may look for industry partners to either operate or invest in specific divisions.
AMSA has shuttered two steel mills and an iron ore mine, while still maintaining operations at a facility in Vanderbijlpark, south of Johannesburg, that produces steel sheets and other items.
It has also paused production at facilities in Pretoria and Saldanha on the West Coast. The IDC regards its mills as essential to the country’s industrial capabilities.
Formerly known as Iscor, AMSA came under the ownership of Indian billionaire Lakshmi Mittal’s LNM Holdings in 2003. In 2006, Mittal Steel merged with Arcelor to establish ArcelorMittal.
