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Official announcement: Green light for ArcelorMittal to sell Galati plant. Government’s levers for managing this situation
de Victor Bratu , 14.5.2018
The European Commission has approved on Monday the acquisition of Italian company Ilva by ArcelorMittal. The decision is conditional on the disposal of several assets owned by Arcelor in Europe to preserve the competition on the EU steel market, the Commission announced.
Galati plant is on the list of assets that ArcelorMittal pledged to sell, which is primarily a concern for the employees, as well as for Romanian decision makers.
How Romanian Government sees this transaction, what assurance gives Competition Council
Government sources stated for cursdeguvernare.ro that Vice Prime Minister Viorel Stefan was appointed as “project manager” in this file, having the “task” to follow the evolution of the sale negotiations of this asset.
Viorel Stefan is to go to Brussels for consultations on the decision issued by the European Commission
The same sources state that it is very likely for the Government to also requests a discussion in the CSAT on this subject.
The delicate issue is given by the fact that the Romanian state has few arguments to intervene in the transactions carried out within the private business environment.
The “safety net” is still at Brussels, as the Commission is going to be the one that also approves the transaction that interests Romania.
“The European Commission is interested in Sidex continuing to be viable so that to generate competitive pressure. In this context, the Commission has set conditions for ArcelorMittal to find a buyer capable to increase the production capacity at Sidex in the coming years,” says Bogdan Chiritoiu for cursdeguvernare.ro.
The head of the Competition Council also says that “the Commission is also aware that there are some national pressures” on Sidex.
Bogdan Chiritoiu also said: “The Romanian Government has the necessary levers to get involved in completing this transaction.”
Business framework set by European Commission
Regarding Galati plant, there is a special condition that ArcelorMittal has assumed before the European Commission – to provide financing for stimulating the development of production by the new buyer.
The Commission also announced that, in the case of all factories to be disposed of by Mittal, it will make sure the buyer companies have the capacity (expertise, financial resources, etc.) and the motivation to continue to operate and develop the activity of the acquired production units.
Assets will be sold to one or more producers that will continue to operate and develop these factories so that they can effectively compete with ArcelorMittal.
Selling a factory to a buyer that would plan a later closure is not an acceptable solution, the Commission said in a statement released on Monday.
The approval had been granted after the in-depth analysis of over 800,000 documents and considering the feedback received from over 200 customers potentially affected by this takeover.
ArcelorMittal is the largest steel producer in the world, and Ilva is one of the most important companies in the EU.
Steel production is a key industry across the EU: 360,000 people are employed in this sector, working in over 500 factories in 23 member states.
Commission will oversee the sale of ArcelorMittal’s assets
The press release contains the following steps that will follow this agreement:
- ArcelorMittal has pledged to organize an open, non-discriminatory and transparent sale of the asset package
- ArcelorMittal will notify the EC after choosing the buyer/buyers of the assets
- The Commission will assess whether the buyer/buyers have the capacity (expertise, financial resources, etc.) and the motivation to continue to operate and develop the business of the production units acquired.
- In other words, selling a factory to a buyer intending to close it later would not be an acceptable solution.
- It is the responsibility of the companies involved in a merger, namely ArcelorMittal and Ilva, to engage in a social dialogue with their workers and inform them on the process.
ArcelorMittal’s commitments – it will provide financing to stimulate the development of Galati production
According to the Commission’s press release:
- It is the responsibility of the parties to respond to Commission’s competition concerns by proposing appropriate solutions. To be effective, commitments must address all the Commission’s concerns and be viable in the long run.
- ArcelorMittal has proposed a set of commitments that fully meet the Commission’s concerns regarding hot-rolled, cold-rolled and galvanized carbon steels. The company offered to discard an extended package of production assets in Belgium (Liege), the Czech Republic (Ostrava), Luxembourg (Dudelange), Italy (Piombino), Romania (Galati) and the former Yugoslav Republic of Macedonia (Skopje). In addition, ArcelorMittal has offered to discard some distribution assets in France and Italy.
- Regarding the hot-rolled steel, Arcelor will sell its plants in the Czech Republic (Ostrava) and Romania (Galati), which is enough to reduce ArcelorMittal’s market power that would have been obtained by acquiring the Italian company. Moreover, regarding Galati, ArcelorMittal has pledged to provide financing to stimulate the development of production by the new buyer.
- Regarding the cold-rolled steel, Arcelor will give up factories in Belgium (Liege), Italy (Piombino), the former Yugoslav Republic of Macedonia (Skopje) and Galati, Romania.
- Galvanized steel – production in Belgium (Liege), Luxembourg (Dudelange), Italy (Piombino), the former Yugoslav Republic of Macedonia (Skopje) and Romania (Galati).
The Commission has found that the assets that Mittal intends to sell are viable and would allow a buyer/buyers to compete effectively and in long-term with the entity resulting from the takeover approved.
In addition, the assets to be sold are from the entire chain from steel production capacities to distribution assets.
What ArcelorMittal Galati means for Romania
ArcelorMittal Galati, part of ArcelorMittal Group, is the largest steel plant in Romania.
The former Sidex Galati was privatized in November 2001, with the Indians buying it with USD 70 million and investment commitments of USD 350 million.
The relationship between the Romanian state and the new employer was not always smooth – many governments accused investors of failing to observe post-privatization plans.
The matter was also the subject of a litigation open in Paris, a dispute that ultimately did not give satisfaction to the Romanian state on the consideration that, indeed, not all commitments have been fulfilled, but total investment target has been exceeded.
In 2016, the plant had just over 6,000 employees, is the largest employer in the county, with almost 10% of the workforce in the city.
The impact of the company is much higher considering the horizontal or complementary industries supported in the county.
2016 brought ArcelorMittal losses of RON 271,358,373, at a turnover of almost RON 3.5 billion.