ArcelorMittal Sells Stake in ATIC Services As Part Of Efforts To Deleverage
ArcelorMittal (NYSE:MT) recently announced the sale of its stake in the European port handling and logistics company, ATIC Services S.A. to HES Beheer N.V. for an undisclosed amount. The company said in a statement that it had signed a sale and purchase agreement with HES Beheer for the sale of ArcelorMittal’s 78% stake in ATIC Services. The transaction is subject to customary closing conditions including competition clearance and is expected to be completed in June 2014. [1]
The transaction is consistent with ArcelorMittal’s strategy of selectively divesting its non-core assets in order to pare down its debt.
You can check out our complete analysis for Arcelor Mittal here:
Stake Sale In ATIC Services
ArcelorMittal currently holds a 78 % stake in ATIC, with HES Beheer holding the remaining 22% stake. The transaction would give HES Beheer 100% ownership in ATIC.
ATIC Services is a European company offering services covering the entire logistics chain associated with coal, bulk logistics as well as iron and steel products. HES Beheer is a holding company for providers of logistical services at ports. The HES Group companies provide stevedoring, storage and processing services for dry and liquid bulk products including raw materials for the energy, steel and aluminum industries. These companies handle 60-70 million tonnes of products a year and their operations are mainly concentrated in the Netherlands [2]
Consolidated revenues from ATIC Services amounted to $239 million for ArcelorMittal in 2012. This is insignificant for a company with revenues of $84 billion in the same period. Furthermore, logistics are not a part of the core business of the world’s largest steelmaker.((ArcelorMittal’s 2013 20-F, SEC))
Stake Sale Part Of Broader Efforts To Deleverage
Due to a high level of debt on ArcelorMittal’s balance sheet and the weak steel industry outlook, major rating agencies downgraded the company’s credit rating to junk status in 2012. This raised the cost of borrowing for the company.
The company has since then embarked upon a concerted effort to pare down its heavy debt burden. Net debt for the company stood at $16.1 billion on December 31, 2013 down from $21.8 billion on December 31, 2012. The decrease in net debt is primarily due to improvements in cash flow from operations and cash proceeds from divestments.
The company has set itself a medium term net debt target of $15 billion, though it has not specified an exact timeframe in terms of years. The divestment of its stake in ATIC is a continuation of its strategy of divesting non-core assets in order to reduce its debt burden. The company has generated approximately $4.7 billion from asset sales from September 2011 to December 2013. [3]
The Road Ahead
We expect the net debt figure for Q1 2014 to rise because of ArcelorMittal’s acquisition of ThyssenKrupp’s Alabama steel plant as well as investments in working capital. However, the company maintains that it is committed to its medium term net debt target of $15 billion. Thus, there could be further stake sales in non-core assets by the company in the near future. [4]
We have a Trefis price estimate of $16.03 for ArcelorMittal which is almost at par with the market price. We will revise this in the light of the first quarter earnings announcement.
- ArcelorMittal Signs Sale And Purchase Agrement For Sale Of ATIC Stake, ArcelorMittal Press Release [↩]
- ArcelorMittal Sells 78%Stake in ATIC to HES Beheer, The Economic Times [↩]
- Global Steel And Mining Conference 2013 Presentation, ArcelorMittal Website [↩]
- ArcelorMittal’s Q4 2013 Earnings Conference Call Transcript, Seeking Alpha [↩]