Billionaire Lakshmi Mittal-led ArcelorMittal has agreed to offload three of its US steel operations to Black Diamond Capital Management. However, the value of deal has not been disclosed by the steel giant. Nonetheless, the transaction is expected to close in April this year.
The sale deal includes ArcelorMittal's operations at LaPlace in Louisiana, Harriman in Tennessee and El Paso in Texas. The LaPlace steel facility and rolling mill in Harriman produce long steel products including billets, angles, flats, channels and beams.
The Wall Street Journal reports that the deal may be completed in April 2016. ArcelorMittal has decided to offload non-core assets as part of its latest strategy. Vinton facility in El Paso produces rebar and grinding media and long steel products. ArcelorMittal is suffering from competition from China.
Jim Baske, Executive Vice-President and Chief Executive of ArcelorMittal North America, said "The sale of LaPlace and Vinton is consistent with ArcelorMittal's stated strategy of selective divestment of noncore assets."
Recently, ArcelorMittal has raised $3 billion funds from rights issue. The steel giant will use these proceeds to strengthen its balance sheet and reduce debt burden. The global oversupply situation in the steel sector is hammering down prices and keeping more pressure on ArcelorMittal, according to Seeking Alpha.
Oversupply situation in China is pulling down prices. ArcelorMittal's net sales declined to $63.58 billion in 2015 from $72.28 billion in 2014 while its net loss was at $7.9 billion in 2015. Most of the net loss was due to $4.8 billion written down on iron ore mining business. About $1.3 billion charge on inventory has further added to net loss.
Luxembourg-based ArcelorMittal is expected to reduce its debt of $15.7 billion recorded last quarter of 2015. In a regulatory filing, the world's largest steel manufacturer informed that it has made a definitive transaction agreement with Black Diamond Capital Management on selling LaPlace and Vinton Long Carbon facilities in the US.
FirstPost further adds that the terms of the transaction are confidential and would not disclosed by both the companies. However, ArcelotMittal has also inked another pact with Black Diamond on a transaction services agreement to ensure smooth transition period. The transaction services agreement envisages no business disruption during the transition period.
Jim Baske has thanked the employees of LaPlace and Vinton for their commitment and efforts over the years. He wished them a successful future under new ownership. Black Diamond manages more than $8 billion in assets in control distressed/ private equity, hedge fund and CLOs and other structured vehicles.
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