IDC nears R10bn deal for ArcelorMittal SA

South Africa’s biggest development-finance institution reached an initial agreement with ArcelorMittal SA to take over the steel giant’s South African unit in a deal worth about R10 billion, people familiar with the matter said.

The Industrial Development Corp’s offer includes a cash component of about R3 billion and the financier will take on about R7 billion of debt accumulated by ArcelorMittal South Africa, said the people who asked not to be identified because the information is private.

The transaction would mark one of the South African government’s biggest industrial interventions in years and effectively place a key industrial asset under the control of the state-owned IDC. The aim is to conclude the deal, which will be subject to a shareholder vote, by the end of the year, the people said.

Shares in AMSA, as the local unit is known, surged as much as 21%, the most since September last year, in Johannesburg trading, giving the company a market value of R1.3 billion.

A 10-year agreement with local Black economic partner Likamva Resources, which has a stake in AMSA, will come to an end in early December and it’s unlikely that it will form part of the new ownership structure, said the people. The government requires large companies to take on Black-owned partners to help broaden the country’s wealth to the Black majority, which was largely locked out of the economy during apartheid.

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The takeover of South Africa’s largest steelmaker will bring to an end negotiations that began in November 2023, when AMSA announced it planned to shut two steel mills that produce grades that are crucial to the country’s key automotive and mining industries.

That led to the intervention of the IDC, already a shareholder in the business, and South Africa’s trade and industry department as they sought to save an industry seen as key to the country’s manufacturing businesses.

AMSA declined to comment.

The IDC said it remains in talks “to find a lasting solution to the challenges facing the steelmaker with the objective of protecting South Africa’s vital steel-manufacturing capabilities,” and that it would communicate any outcomes.

A detailed process will be followed to allow for completion of the transaction, said the people. After the deal closes, the development financier would start a strategic review of the businesses and could seek industry partners to operate or invest in specific divisions.

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AMSA has closed two steel mills and an iron-ore mine. It still operates a facility in Vanderbijlpark, south of Johannesburg, which produces steel sheets and other products. It has idled facilities in the capital, Pretoria, and in the west coast town of Saldanha. The IDC sees its mills as crucial to the nation’s industrial sector.

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AMSA, formerly known as Iscor, came under the control of Indian billionaire Lakshmi Mittal’s LNM Holdings in 2003. Mittal Steel in 2006 combined with Arcelor to form ArcelorMittal.

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