ArcelorMittal to sell 50% stake in shipping business to cut debt

ArcelorMittal, the world's leading steel and mining company, on Monday said it has signed a share purchase agreement to sell 50 per cent stake in its shipping business, as part of its strategy to offload $2 billion of assets by the mid-2021 to cut its debt.

The Lakshmi Niwas Mittal-led company has entered into a share purchase agreement with DryLog Ltd for sale of 50 per cent stake in Global Chartering Limited (GCL), its wholly owned shipping business, and subsequently forming a 50:50 shipping joint venture (JV). The transaction is expected to close before the end of 2019.

The stake sale and JV formation will ultimately impact ArcelorMittal's net debt by $530 million, with $400 million on completion and a further $130 million due in early 2020.

The transaction is part of ArcelorMittal's commitment to unlock up to $2 billion of value from its asset portfolio by mid-2021, the steel major said.

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"The JV will benefit from the combination of the two businesses' respective knowledge and expertise, and ArcelorMittal's extensive annual cargo commitments, a portion of which will be handled exclusively by the JV. It will also benefit from DryLog's ability to optimise transport solutions and its technical and commercial vessel management expertise," it said in a statement.

According to ArcelorMittal, these factors will enable the joint venture to grow its operations and become a significant player in the international shipping industry.

Currently, GCL operates 28 dry cargo vessels, which range from Supramax to Capesize classes. Out of them, 25 are on long-term leases and will be transferred into the joint venture, while the remaining three are owned by GCL.

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During July-September quarter of 2019, ArcelorMittal recorded a net loss of $539 million or $0.53 loss per share, compared to a net income of $899 million or $0.88 per share in the previous year. Sales of the company declined to $16,634 million from $18,522 million in the year-ago period, due to lower average steel selling prices, lower steel shipments and lower market-priced iron ore shipments.

As of September 30, 2019, ArcelorMittal's gross debt stood at $14.3 billion compared to $13.8 billion as of June 30, 2019. Net debt increased by $0.5 billion during the quarter to $10.7 billion, primarily driven by negative free cash flow due in part to a seasonal working capital investment ($0.2 billion).

Edited by Chitranjan Kumar