[miningmx.com] — ARCELORMITTAL finalised details of a spin-off of its stainless steel division, which may spark consolidation in a sector burdened by over-capacity.
ArcelorMittal unveiled initial plans in July to separate stainless steel from its core operations after years of seeking a merger for the unit to slash costs.
The group said on Wednesday it would hand out shares in the unit to investors on a 1-for-20 shares basis in the first quarter of next year. It will be listed on Euronext.
“Given the over-capacity in the industry, there’s a need for consolidation and rationalisation. The entry of ArcelorMittal Stainless as an individual unit, separately listed, could serve as a catalyst for that,” said analyst Jeff Largey at Nomura.
“One thing it does is it puts another multiple into the market. Now you’ll have three separately listed stainless producers. So it helps from that perspective, from a valuation point of view.”
The new unit would join Acerinox SA of Spain, the world’s biggest stainless producer, and Finland-based Outokumpu Oyj.
Largey estimated a market capitalisation for the ArcelorMittal unit at about $2.8bn, and including about $1bn in net debt, an enterprise value of about $3.8bn.
That compares to a market value of $3.9bn for Acerinox and $3.3bn for Outokumpu.
The business employs around 11,000 people, about 4% of ArcelorMittal’s total workforce.
The stainless steel division’s 2009 sales were $4.2bn, or about 7% of the group’s total consolidated sales.
“It’s to create value, it’s part of the business that can do better on its own,” an ArcelorMittal spokesman said.
ArcelorMittal said it expected the spin-off to result in a non-cash impairment charge of about $800m and said the divestment would not affect its leverage ratio.
