Arcelor Mittal said Wednesday it will buy Sicartsa, a Mexican integrated steel producer, from Grupo Villacero for $1.43 billion.
Sicartsa produces long steel, with an annual production capacity of approximately 2.7 million tonnes from its facilities in Mexico and Texas. Through its wholly owned mine, linked directly to the plant via a slurry pipeline, Sicartsa has estimated iron ore reserves of 160 million tonnes, providing 30 years of reserves at current production rates.
As part of the deal, Arcelor Mittal entered into a 50/50 commercial joint-venture with Villacero for the distribution and trading of Arcelor Mittal long products in Mexico and in the southwest of the United States, capitalizing on Villacero’s commercial network.
"With the Mexican market expected to grow by up to 6% per year over the next ten years this is the ideal time to expand our presence in this country," said Aditya Mittal, CFO Arcelor Mittal said." Through the implementation of rapid technological and best practice transfer, we see significant potential for improving the profitability of Sicartsa."
This is Arcelor Mittal’s first acquisition since the creation of the company earlier this year and demonstrates the company’s desire to further consolidate the steel industry. Arcelor Mittal expects this acquisition to generate $80 million of industrial synergies in addition to a further $50 million from commercial, procurement and selling, general & administrative synergies.
In 2004, Sicartsa’s revenue was $956 million. The deal is expected to close it the first quarter.