ArcelorMittal South Africa turns down Networth Investments’ buyout offer

ARCELORMITTAL South Africa (AMSA) has turned down a £826 million buyout proposal from Networth Investments, a local firm aiming to revitalise South Africa's struggling steel industry.

Harold Vermaak, CEO of Networth, shared with Business Report that his company had proposed acquiring ArcelorMittal Group’s 60 per cent stake in AMSA and an additional 2 per cent held by other foreign investors in a leveraged buyout. Networth’s plan was to enhance AMSA's output with green technology and boost its production of high-value stainless steel, modelled on industry practices from India.

However, a spokesperson from ArcelorMittal stated that “the correspondence [from Networth Investments] does not reflect a firm or a bona fide offer. There is, therefore, no offer to be considered.”

Vermaak outlined a strategy for AMSA to shift away from low-value products in favour of higher-value outputs like stainless steel. He noted that the proposed capital expenditure would be funded through vendor finance arrangements with companies in Italy and Germany to support AMSA's long-product production and reopen the Saldanha Steel plant, which ceased operations in 2020 due to financial unviability. An offtake agreement would also be reached with a Swiss steel-trading company with an annual turnover of £5.87 billion, he said.

AMSA, which recently reported significant losses, had a market valuation of around £82 million on the Johannesburg Securities Exchange last week, with net borrowings totalling approximately £165 million, part of which includes loans from the Industrial Development Corporation (IDC).

Vermaak added that discussions with government stakeholders have been promising, with plans for AI-based upgrades at AMSA’s main plant in Vanderbijlpark, operations in Newcastle, and the potential reopening of Saldanha. “We aim to make 900,000 tonnes per year of export-competitive carbon steels to meet climate-friendly obligations,” Vermaak stated.

Vermaak said the proposed restructuring could improve South Africa's steel sector by consolidating underperforming assets, potentially adding 1.5 per cent to the economy by 2028, creating sustainable jobs, and expanding green steel exports to markets like China.

AMSA recently posted a headline loss exceeding £43 million for the half-year ending June 2024, continuing a trend seen over the past year. The company attributed the losses to weak global steel markets, declining local demand, rising energy and logistics expenses, and heightened duties in export markets.

“Despite the recent optimism in South Africa, the domestic steel industry has been facing a particularly difficult period,” AMSA commented.

Originally formed from the state-owned Iscor, AMSA was rebranded following the 2006 merger of Mittal Steel with Arcelor, becoming part of the global ArcelorMittal Group.

(With inputs from PTI)