ArcelorMittal and Marcegaglia have announced that AM Investco Italy has reached an agreement relating to the lease with obligation to purchase contract for Ilva's business complexes. The complementary documentation will be completed by 30 June, while Intesa SanPaolo will formally join the consortium before the closing of the transaction.
The agreement provides for a purchase price of 1,8 billion euros, with annual lease payments of 180 million euros to be paid quarterly. Initially AM Investco will use the Ilva assets for rent, with the rents quantifiable as an advance on the purchase price. The start of the lease is scheduled for the end of 2017 and is subject to the authorization of the competent authorities.
A contribution from Ilva is expected to increase ArcelorMittal's EBITDA in the first year and to increase the company's free cash flow from the third year. The consortium's plan also establishes industrial investments of 1,3 billion euros and environmental investments of 1,1 billion over seven years. The latter include 288 million euros for reclamation works, financed with what the Italian government seized from the previous owner, the Riva Group. The intention to adopt innovative technologies with low carbon emissions in the future, including those for the capture and recycling of CO2, and the commitment to explore the possibility of using the pre-reduced when the conditions of economic sustainability consistent with the Business Plan occur .
Lakshmi N. Mittal, President and CEO of ArcelorMittal comments: “Today represents an important step forward in the Ilva acquisition process. We are eager to get to work and for now we will focus on finalizing the deal to be achieved as soon as possible. We have in-depth knowledge of what needs to be done to improve company performance and, above all, relations with stakeholders and the territory. Our vision for Ilva is to make it a point of reference for modern integrated steel production. We will achieve this result by implementing our industrial and environmental plans, which we will support with substantial investments. We have the capital, technologies, business relationships and management capacity at our disposal to ensure a positive transformation. It will also be essential to involve stakeholders and maintain a transparent dialogue aimed at restoring the relationship of trust between Ilva and its employees and the local area. We are fully aware of the trust placed in us as Ilva's new owners and will pay great attention to position Ilva as a responsible, capable and worthy company: key factors in ensuring its future success and sustainability”.
Aditya Mittal, Chief Executive Officer of ArcelorMittal Europe and Chief Financial Officer of the Group says: “Ilva is a highly strategic acquisition for ArcelorMittal. It guarantees us a significant production presence in a country in which we did not have any primary steel capacity, complementary to our European activities. I am convinced that this presents a unique opportunity for us and I am delighted to have won the tender with our offer. We have a lot of work to do once the transaction is formally completed and we have operational control of Ilva, but I believe we can improve its performance rapidly and we expect a positive contribution to EBITDA as early as year one. There is no reason why Ilva's performance in the long term cannot be aligned with that of our best plants in Europe.”
Antonio Marcegaglia, President and CEO of Marcegaglia says: “We are proud to have been able to contribute to the relaunch of such a fundamental asset for our country and eager to work with the unions and all the other stakeholders. I am certain that our consortium has all the necessary qualities to restore Ilva, providing a positive contribution to the Italian economy as well as to the territories in which the company is present."
The effectiveness of the contract is subject to the occurrence of certain conditions precedent, including disclosure and consultation obligations. The sale of the assets and the payment of the purchase price will take place on the final date of the conclusion of the two-year lease period and will be conditional on the revocation of the seizure of some assets by the Court of Taranto. The closing of the transaction is also subject to the approval of the competent European supervisory authorities.
