Bank of America Merrill Lynch has been hired by the biggest steelmaker in the world, ArcelorMittal to dispose of some of its assets in order to get approval to purchase Ilva, an Italian steel firm. Earlier in the year ArcelorMittal offered to sell a galvanized steel plant located in Italy besides units in other European countries such as Belgium, Luxembourg, the Czech Republic, Macedonia and Romania in order to get the approval of EU regulators in its bid to acquire Ilva at a price of 1.8 billion euros. The approval by the EU regulators earlier was finally given earlier in the week.
Steelmakers from Asia and Europe are expected to be the potential buyers of the assets. According to the European Commission the steel plants will be sold to buyers who will give commitments to continue operating them and thus compete with ArcelorMittal.
The offer from ArcelorMittal was cleared by the antitrust watchdog of the European Union after feedback had been sought from customers and rival regarding the concessions. Initially concerns had been raised over the fact that the deal had the potential to lead to higher steel prices for customers located in southern Europe after reducing competition for certain flat carbon steel goods.
Since they reached a 12-year low two years ago the steel equity values have increased by more than double across the globe. Ilva is currently the biggest steel plant in Europe as it has a capacity to produce 11 million tons. Its acquisition by ArcelorMittal is expected to reduce the number of market players and thus enhance EU steelmakers’ pricing power. Last year Thyssenkrupp and Tata Steel reached a deal to combine their steel assets in Europe.
Billions in investment
After acquiring Ilva, ArcelorMittal has indicated that it will invest 2.4 billion euros to clean up and modernize the firm that has faced charges of environmental crime and corruption for years. These were some of the issues the European Commission expects to commit after giving ArcelorMittal the go-ahead to acquire Ilva.
“…the sale of Ilva’s assets to ArcelorMittal should also help accelerate the urgent environmental clean-up works in the Taranto Region. This essential de-pollution work should continue without delay to protect the health of Taranto’s inhabitants,” Margrethe Vestager, the EU Commissioner responsible for competition policy,said in a statement after ArcelorMittal got the greenlight.
Across the European Union around 360,000 people are employed in the steel sector in over 500 production sites located in 23 member states.