September 15, 2008
Sale of Ore Miner Lures Top Bidders DEALTALK
By Tom Miles
The shake-out of bidders for the Brazilian iron ore miner Namisa has left contenders with deep pockets and big appetites, sources familiar with the bidding said, signaling that the owner, CSN, may sell a majority stake.
CSN has taken advantage of a hot iron ore market and has tempted steel makers by promoting Namisa's huge growth potential.
ArcelorMittal, one of the world's most acquisitive companies, is among several companies still interested after final bids went in this month, according to sources familiar with the sale process.
Arcelor showed its eagerness last month when it agreed to pay $810 million for the Brazilian iron ore assets of London Mining, 50 percent above the company's entire market value. It also said it would build a $250 million port shipping 10 million tons a year.
Also interested are Tata Steel of India and several of the top steel makers of Japan, together with the trading house Itochu. Several sources said that a consortium led by China's top private steel maker, Shagang Group, was also in the hunt.
That lineup points to a bigger rather than smaller stake.
"If they are going to sell the whole thing, it's going to favor Arcelor or the Japanese," said one investment banker in the sector, who declined to be identified. "If it's a minority stake, then the Chinese."
All are hungry and have access to financing. Bankers say that Japanese companies are getting more assertive in the face of Chinese competition for global assets, while Tata Steel is seeking private equity investment that one banking source put at $2 billion to $3 billion.
Shagang's finances are unclear, though it could attract the backing of a state bank with almost limitless funds.
CSN and its adviser, Goldman Sachs, want to sell 40 percent to 50 percent of Namisa. They have complicated the sale, however, by saying they would entertain bids for the whole unit. Neither would comment on the sale, which should be completed in a month.
Other early bidders like Shougang Group, a Beijing-based steel maker, appear to have fallen out of the race. Bankers say that China's state financiers are increasingly cautious about overpaying.
"Chinese planners are aggressive, but they don't want to be the stupid money," said an investment banker focusing on China. "Ultimately the Chinese buyers have very strong views about value."
Severstal of Russia, which made a string of acquisitions this year, has also appeared to rule itself out.
"If an opportunity comes up, we'll take a look at it," Severstal's chief financial officer, Sergei Kuznetsov, said during a conference call with analysts last week, according to a Thomson Reuters transcript. He added that there was no major acquisition currently planned.
One potentially unappealing aspect of Namisa is the need to cooperate with CSN on port access, which one Japanese trading company executive said had discouraged his company from entering the bidding.
"A lot of people are concerned about getting into bed with CSN," said a source involved in Namisa bidding. With that in mind, several observers expressed surprise at Arcelor's interest.
Namisa's value depends on iron ore prices and its production growth. CSN has touted a long-term plan to increase Namisa's output from seven million ton this year to more than 40 million tons.
Originally published by Reuters.
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