World steel-producing giant ArcelorMittal said on Dec. 8 that it would float its stainless steel activities on the stock market in the first quarter of 2011.
The operation would generate a depreciation charge of about $800 million, representing the difference between the book value and the lower estimated market value, the company said.
The stainless steel business has been hard hit by the economic downturn, and the group said it had now decided to separate these activities in order to maximize value for shareholders. The group had sought for some years to merge the stainless steel activities, employing 11,000 people, with those of a competitor.
Chief executive Lakshmi Mittal said that in the absence of any other solution, a separate flotation could release value in the business.
The stainless steel sector in Europe is widely considered to be unduly fragmented. The sector is highly competitive.
Sales by ArcelorMittal in the sector fell by half last year to $4.2 billion.
An analyst at Oddo Securities said that the decision appeared "rather positive because it is a business which has been badly affected by the crisis." The solution might enable it to restructure and grow.
The operation, yet to be approved by shareholders, would be achieved through the distribution of shares in the new entity to shareholders in the group on the basis of one share in the stainless steel unit for 20 shares in AreclorMittal held.
The Mittal family would remain 40% shareholders in the new business, in line with its holding in the parent company. The new company would have debt of about $1 billion.
Copyright Agence France-Presse, 2010