Newspaper article International Herald Tribune

Steel Giant Sells Stake in Iron Mine to Asia Group ; ArcelorMittal Ore Pact Ensures Supply Line to Taiwan and South Korea

Newspaper article International Herald Tribune

Steel Giant Sells Stake in Iron Mine to Asia Group ; ArcelorMittal Ore Pact Ensures Supply Line to Taiwan and South Korea

Article excerpt

The sale of 15 percent of ArcelorMittal Mines Canada to an Asian group for $1.1 billion continues a debt-reduction drive as the company struggles in a weak global economy.

The giant steel maker ArcelorMittal agreed Wednesday to sell a 15 percent stake in one of its premier units -- the iron ore subsidiary ArcelorMittal Mines Canada -- for $1.1 billion to an Asian group.

The deal continues a debt-reduction effort by the company, through asset sales, as it struggles in the weak global economy. ArcelorMittal, which is based in Luxembourg, says demand for steel in the crucial European market is down about 30 percent from 2007.

After putting together the world's largest steel company through a series of acquisitions and takeovers in the years before the financial crisis, Lakshmi Mittal, ArcelorMittal's chief executive and controlling shareholder, is now gradually shrinking it. This latest deal brings the group's total asset sales since September 2011 to $4.2 billion.

Under the terms of the sale announced Wednesday, a consortium that includes Posco of South Korea, the world's fifth-largest steel maker, and China Steel of Taiwan will gain long-term access to iron ore from the Canadian mines.

ArcelorMittal will retain an 85 percent stake.

News of the deal was well received by stock markets on Wednesday, seemingly because ArcelorMittal appeared to receive a good price for the sale without giving up much.

ArcelorMittal closed up 4.5 percent in late afternoon trading in Europe. Posco shares rose 3.3 percent Wednesday, while China Steel increased 0.9 percent.

Jeff Largey, a steel analyst at Macquarie in London, wrote in a research note that the $7.3 billion valuation for the mining operations was "an excellent result" for ArcelorMittal. He said that his valuation of the operations had been closer to $4 billion.

Market participants are also apparently pleased that the deal will help ArcelorMittal continue to reduce debt.

Last year, the ratings agencies Moody's Investors Service and Standard & Poor's both cut ArcelorMittal's credit rating to junk status because of its high debt and in anticipation of a worsening environment for the steel industry. …

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