ArcelorMittal to acquire Brazilian steelmaker CSP for $2.2 billion

ArcelorMittal, the world's leading steel and mining company, on Thursday announced the signing of an agreement with the shareholders of Brazil’s Companhia Siderúrgica do Pecem (CSP) to acquire the company for an enterprise value of approximately $2.2 billion. 

CSP, with its state-of-the-art steel facility in the state of Ceará in northeast Brazil, is a world-class steel maker, producing high-quality slab at a globally competitive cost. CSP operates a three million tonne capacity blast furnace and has access via conveyors to the Port of Pecém, a large scale, deep water port located 10 km from the plant. Operating within Brazil’s first Export Processing Zone, CSP benefits from various tax incentives, including a low corporate income tax rate.
The acquisition brings several strategic benefits to ArcelorMittal, including the potential to expand the company’s position in the high-growth Brazilian steel industry. CSP can add 3 million tonnes of high-quality and cost-competitive slab capacity, with the potential to supply slab intra-group or to sell into North and South America.
Besides, the acquisition will allow ArcelorMittal capitalise on the significant planned third-party investment to form a clean electricity and green hydrogen hub in Pecem.
Further, the company will have the option to add primary steelmaking capacity (including direct reduced iron) and rolling and finishing capacity.
ArcellorMittal has identified over $50 million of identified synergies, including SG&A, procurement and process optimisation.
The state of Ceará has ambitious plans to develop a low-cost green hydrogen hub. The Pecém Green Hydrogen Hub, a partnership between the Pecem Complex and Linde, a leading global industrial gases and engineering company, is a large-scale green hydrogen project at the Port of Pecém which is targeting to produce up to 5GW of renewable energy and 900 kt/y of green hydrogen in a series of phases. The first phase, which the partnership currently expects to be completed over the course of the next five years, targets the construction of 100-150MW of renewable energy capacity.
“In CSP, we are acquiring a modern, efficient, established and profitable business which further enhances our position in Brazil and add immediate value to ArcelorMittal. There is significant potential to decarbonise the asset given the state of Ceara’s ambition to develop a low-cost green hydrogen hub and the huge potential the region holds for solar and wind power generation,” ArcelorMittal CEO Aditya Mittal said.
“What makes this acquisition so exciting is the medium to long-term potential and options it presents. As we continue to develop the downstream capabilities of our NAFTA and Brazilian businesses over the medium-term, we have the option for CSP to become an important intra-group slab supplier. Over the longer-term there is also the option to significantly increase its slab capacity and add rolling and finishing capabilities on a low-carbon emissions basis,” he added
ArcelorMittal on Thursday reported a 2 per cent decline in its net income at $3.92 billion for the second quarter ended 30 June 2022. The company posted a net income of $4.0 billion in the corresponding period last year.
Second quarter (April-June 2022) operating income stood at $4.5bn, marginally higher compared to $4.4bn in the previous quarter (January-March 2022) and an operating income of $8.9bn for the first half (January-June 2022)  against $7.1bn in H1 2021.
ArcelorMittal also announced the completion of its acquisition of Voestalpine’s world-class hot briquetted iron plant located in Texas, USA, with a potential to generate more than $130 million in EBITDA per year
The company generated $3.2bn of free cash flows in H1 2022 and returned $2.3bn to shareholders (via share buybacks and base dividends while also committing $1.0bn to M&A (primarily the Texas HBI facility)
ArcelorMittal had net debt of $4.2bn at the end of June 2022, which remained essentially stable compared to $4.0bn as of the end of last year.
The company also announced a new buyback programme of 60 million shares (at $1.4bn current share price) to be completed by the end of May 2023.