ArcelorMittal led consortium to buy Italy’s steelmaker Ilva in a $2 billion deal

A consortium led by global steel giant ArcelorMittal received clearance from Italian authorities to buy struggling steel producer Ilva. The 1.8-billion euro ($2.02 billion) deal will see ArcelorMittal join forces with Italy’s Marcegaglia to snap up the heavily indebted company.

Italian bank Intesa Sanpaolo will join the consortium before the deal is closed, likely to be before 30 June. The offer includes plans to invest 2.4 billion euros in Ilva, with funds earmarked for upgrading industrial equipment and improving environmental standards.

Ilva currently has 14,000 employees, of whom 11,000 work at its site in Tarento, one of the most polluting industrial sites in Europe. ArcelorMittal, in its statement, undertook “to keep at least 10,000 employees for the entire duration of the industrial plan according to the outcome of negotiations with the unions”.

Ilva’s Taranto site in southern Italy is at the centre of a huge legal case in which experts cited by prosecutors have charged that 11,550 people have died from toxic emissions in seven years.

“Ilva is an important strategic acquisition for ArcelorMittal,” said Aditya Mittal who heads ArcelorMittal’s European operations.”It provides us with a significant production presence in a country in which we have no primary steelmaking capacity, and is complementary to our existing European business.”

The acquisition will provide Arcelor Mittal with a major, integrated steelmaking asset which is Europe’s largest single steel site, in Europe’s second largest steel market. The investment plan has identified synergies of €310 million targeted by 2020 that excludes impact from fixed cost reductions and volume improvements.

The plans also include an environmental capital expenditure of €1.1 billion that will ensure Ilva complies with the Integrated Environmental Authorisation (AIA) as set out by the Italian Government, and will improve Ilva’s environmental performance in areas including air emissions and water treatment.

In a statement to the media, Lakshmi N. Mittal, Chairman and CEO, ArcelorMittal said, “Our vision is for Ilva to become a benchmark for modern integrated steelmaking and this will be realised through the implementation of our industrial and environmental plans, backed up by significant investment. We have the capital, the technology, the commercial relationships and the management depth to bring about a positive transformation.”

Till the completion of the AIA provisions, crude steel production will be limited to 6 million tonnes per annum. Finished steel shipments will systematically increase to 9.5 million tonnes by 2023. In the interim, crude steel production will be supplemented by imported slabs and hot rolled coil, in order to maximise utilisation of Ilva’s finishing facilities. ArcelorMittal consortium has also given a commitment to keep at least 10,000 employees for the entire duration of the industrial plan.

Ilva represents a unique opportunity to add significant value to ArcelorMittal’s European business. Ilva is the largest, and only integrated, steelmaker in Italy. Its main production facility in Taranto is strategically well located, sitting next to one of Europe’s largest deep-water ports, hence enabling easy access to raw materials. Ilva also has significant steel finishing capacity, in Taranto, Novi Ligure and Genova, all in Italy.

It provides ArcelorMittal with a primary production presence in Italy, Europe’s second largest steel consuming market, and a country in which the Company currently has no primary steelmaking capacity.

Italy imports between 60 and 70% of its flat steel requirements, in part due to a decline in Ilva’s output because of numerous commercial, quality and environmental issues it has faced in the recent past; ArcelorMittal believes that, over time, Ilva’s production levels and competitiveness can be restored.

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