IDC tables R3bn offer for Amsa amid BEE ructions - TimesLIVE

The Industrial Development Corp (IDC), bastion of South Africa’s dwindling industrial base, has put in a R3bn offer to buy 80% of ArcelorMittal South Africa (Amsa) — but the steel major is trying to squeeze its BEE partner out of the windfall.

Business Times can today report, based on information from sources with intimate knowledge of the deal, that the offer was tabled in July but implementation has been delayed pending agreement on certain conditions, including the empowerment structure.

The sources said the parties have agreed on “nearly everything”, including the pricing, but the transaction is stalled due to a disagreement on how to handle the empowerment aspects. The sources said Amsa does not want its BEE partner, Likamva Resources, to be part of the deal.

According to the insiders, the state-owned IDC is to pay between R2.8bn and R3bn for full control of Amsa, which has been struggling to stay afloat — reporting more than R5bn in losses in the past two financial years.

Under the proposed deal, the IDC will take an 80% stake in Amsa, with Amsa itself retaining 20%. The company will then be delisted from the JSE and “cleaned up” before being relisted. The steelmaker has seen its market value plunge to R1.3bn on the JSE, from a high of about R56bn in 2007.

The company, South Africa’s primary steel producer, is 67% owned by the Mittal Group based in Luxembourg, with Likamva holding 17% in terms of a 10-year contract that expires at the end of the year.

Amsa declined to comment, referring Business Times to a Sens statement issued on August 28 in which it said discussions on a transaction with the IDC were at an advanced stage. “Amsa is unfortunately unable to comment further than the Sens at this stage, but once discussions are finalised, we will make a public statement.”

The IDC told Business Times on Friday it does not comment on speculation or other operational matters related to listed entities.

How do you solve a problem? You say, ‘We’re not going to do a deal today; let’s wait for it to expire in December’

“However, what we can affirm is that the IDC remains engaged in discussions with Amsa, the ArcelorMittal Group, and government partners, including the department of trade, industry & competition (DTIC), to find a lasting solution to the challenges facing the steelmaker with the objective of protecting South Africa’s vital steel manufacturing capabilities,” it said.

The sources said Amsa had also asked the IDC for a further injection of R300m to stave off 300 planned job cuts. Two years ago the IDC gave Amsa a R1bn lifeline and last year it provided an additional R1.68bn to defer the winding down of the long steel business.

In addition to IDC loans, Amsa received R417m from the temporary employee relief scheme grant, sustaining 2,982 employees as part of a government intervention to keep the mills going.

Amsa brought Likamva Resources on board as its BEE partner in 2016 after creating a special purpose vehicle in the hope of opening the door to new opportunities. That agreement lapses in December, and one insider said Amsa wanted to wait until after this before finalising the IDC transaction, to ensure that Likamva is excluded.

“So in their view, when it expires, then there won’t be a BEE problem,” the source said. “So how do you solve a problem? You say, ‘We’re not going to do a deal today; let’s wait for it to expire in December.’ It means you are disadvantaging 17% plus of your shareholders.

“The deal could be announced tomorrow, but they are not announcing it tomorrow because ArcelorMittal’s local management is saying, ‘Look, we don’t want to deal with BEE, so we’d rather wait until December or January to announce the transaction.’”

The source said the BEE shareholders may vote against the deal and take legal action against Amsa once it is announced.

Another source said the IDC had been exploited in its partnership with Amsa. “Amsa is not the best entity to deal with. It had a number of incentives and tax rebates previously and never invested in furnaces. Those things have come to an end now they want help,” this person said.

The IDC has previously said a competitive steel industry is fundamental to South Africa’s industrialisation agenda. Its CEO, Mmakgoshi Lekhethe, has said the entity wants not only to promote job creation but also to position South Africa as a key player in the global steel market.

“Our efforts are focused on ensuring that the local steel sector is resilient under local and global pressures and able to contribute meaningfully to the country’s industrialisation objectives and infrastructure-build programme,” she said.

In terms of the proposed deal, Amsa must heed the Competition Commission’s requirement that there will not be any retrenchments.

One source said the DTIC was backing the deal despite the challenges. “[It] owes it to the people of Newcastle to conclude the deal; a lot of jobs are at stake.”

Amsa has long threatened to close its long steel business, which employs 3,500 people in Newcastle and Vereeniging. A year ago it placed its blast furnace in Newcastle in care and maintenance due to “structural challenges”, saying it had no alternative.

Amsa, which has said the steel industry is facing its “greatest challenge since the events of the financial crisis of 2008-2009″, continued bleeding cash during the six months ended June. The group’s ebitda loss widened to R409m from a R110m loss a year earlier. Headline losses were R1.48bn from R1.01bn in 2025.

The group closed its Saldahna plant in the Western Cape in 2020 due to rising power and transport costs, cheap imports and other factors.