ArcelorMittal SA rejects 19 bn rand buyout offer of Networth Investments

ArcelorMittal South Africa (AMSA) has rejected a 19-billion rand buyout offer by local firm Networth Investments.

Networth had planned to transform the country's struggling steel industry with green technology and more profitable stainless-steel production based on models in India.

Networth CEO Harold Vermaak told the daily Business Report that his company had put in an offer to buy out ArcelorMittal Group's 60 per cent shareholding in AMSA, and around 2 per cent of AMSA's shares held by other foreign investors, in a leveraged buyout.

However, a spokesperson of ArcelorMittal told the daily, "the correspondence (it had received from Networth Investments) does not reflect a firm or a bona fide offer. There is, therefore, no offer to be considered".

Vermaak said that the strategy was to convert AMSA over time so that it ceases to produce low-value-priced products, and rather produces higher value products such as stainless steel.

He said he had planned to fund the proposed capital expenditure with vendor finance agreements with a steel company in Italy for long products, and with a company in Germany to reopen AMSA's Saldanha Steel plant, which was shutdown in 2020 because it was no longer viable.

An offtake agreement would be reached with a Swiss steel-trading company that has an annual turnover of 7.1 billion euros (135 billion rand), Vermaak said.

AMSA, which recently reported more losses, had a market capitalisation of about 1.89 billion rand on the Johannesburg Securities Exchange last week. AMSA's net borrowings were about 3.79 billion rand, which included borrowings from state-owned Industrial Development Corporation (IDC).

Vermaak said he had so far held encouraging discussions with the relevant government stakeholders about the proposed offer, which would include changes through artificial intelligence at AMSA's main plant in Vanderbijlpark and its operations in Newcastle, as well as reopening the Saldanha operations.

"We aim to make 9,00 000 tonnes per year of export competitive carbon steels to meet climate friendly obligations," he said.

Vermaak said the consolidation, restructuring and transformation of South Africa's underperforming or inoperative steel assets could potentially grow the economy by 1.5 per cent per year from 2028, create sustainable jobs and, among other things, increase the exports of low-cost high-value green steel exports to China.

AMSA recently reported a headline loss of over a billion rand for the half-year ended June 2024, a trend continuing from the previous year, which the company blamed on a downturn in global steel markets, falling local demand, rising energy and logistics costs, and increased duties in export markets as countries sought to protect their own manufacturing sectors.

"Despite the recent optimism in South Africa, the domestic steel industry has been facing a particularly difficult period," AMSA said.

AMSA was born nearly two decades ago out of the former state-owned steel producer Iscor.

Mittal Steel South Africa changed its name to AMSA after steelmaker Arcelor merged with Mittal Steel in 2006.