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Proposed rights offer, notice of general meeting, BEE transaction and renewal of cautionary
ArcelorMittal South Africa Limited
(Incorporated in the Republic of South Africa
Registration number: 1989/002164/06
Share code: ACL
ISIN: ZAE000134961
(“ArcelorMittal” or “the company”)
AUTHORISATION FOR THE PROPOSED RIGHTS OFFER, NOTICE OF GENERAL MEETING OF SHAREHOLDERS, INFORMATION REGARDING THE
BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION, POSSIBLE FUTURE DEBT RAISING TRANSACTION, AND RENEWAL OF
CAUTIONARY ANNOUNCEMENT
1. Authorisation of the proposed rights offer
1.1 Introduction
ArcelorMittal has in recent years been facing a challenging commercial environment resulting in it having
had four consecutive years of net losses. Key factors contributing to this include:
- the decline in local steel consumption over the past two years;
- increasing cheap imports (with a significant surge year-to-date in 2015), as a result of subdued global
demand and continued capacity expansion, particularly in China; and
- above inflationary increases in key costs over the past few years.
With regard to more recent developments, ArcelorMittal shareholders are referred to the announcement released
on the Stock Exchange News Service ("SENS") on 6 November 2015, wherein ArcelorMittal sets out its unaudited
operational information for the quarter ended 30 September 2015 and trading statement ("Trading Statement").
Shareholders are referred to the Trading Statement regarding the difficult trading conditions the company currently
finds itself in.
Notwithstanding the above, the board of directors ("board") believes that initiatives are in place which will return
ArcelorMittal to profitability in the medium term. In addition to the recent significant depreciation of the
South African Rand against the United States Dollar, which is expected to have a positive effect on the company,
the following interventions are underway:
- consideration by the South African Government ("Government") regarding the increase of additional custom duties on
imported primary steel that is also locally produced from 0% to the bound rate of 10%;
- additional specific "anti-dumping/safeguard" duties under discussion and applications in this regard being submitted
through the relevant processes;
- consideration by the Government regarding the designation of local steel for state procurement and Government
infrastructure spend; and
- agreement on pricing principles for ArcelorMittal produced flat steel in order to ensure that ArcelorMittal steel is
priced appropriately to ensure that downstream steel-dependent industries are competitive while at the same time ensuring
that the company remains sustainable.
The factors highlighted at the beginning of this paragraph are expected to result in a period of net cash outflows.
However due to the reasonable prospect that the interventions being undertaken with Government detailed above will be
successful, the board accordingly intends to propose a rights offer of ordinary no par value shares ("Shares") to raise
additional equity capital of between R4.0 billion and R4.5 billion ("Rights Offer") from ArcelorMittal shareholders
("Shareholders").
This notice concerns the authorisation for the proposed Rights Offer, and provides further information on the possible
broad-based black economic empowerment ("B-BBEE") transaction and possible future debt raising transactions.
1.2 Overview of the proposed Rights Offer
As a first step to restructuring the financial position of ArcelorMittal, the Rights Offer is proposed by ArcelorMittal
to reduce current debt levels, fund near term investment in capital expenditure and positively impact ArcelorMittal’s
ability to raise future debt funding.
The proposed Rights Offer will be made to all Shareholders proportionately to their shareholdings with allowance for excess
applications by Shareholders. The ArcelorMittal group ("the ArcelorMittal Group") will fully underwrite the Rights Offer up
to the maximum of R4.0 billion to R4.5 billion through:
- following its proportion of the Rights Offer of between approximately R1.96 billion and R2.2 billion; and
- subscribing for any remaining Shares not taken up by shareholders, up to a maximum of between R2.04 billion and
R2.3 billion.
Proceeds from the Rights Offer will be used to recapitalise the company with the cash raised being used to assist in the
funding of the company’s five year capital programme. It is intended that the quantum of funds raised from the ArcelorMittal
Group under the Rights Offer and any funds raised from the ArcelorMittal Group taking up remaining Shares not taken up by
shareholders up to a maximum of between R4.0 billion and R4.5 billion will first be used to settle loans from companies
within the ArcelorMittal Group ("ArcelorMittal Group Loan"), with any balance being retained for operational and
capital expenditure purposes. As at the time of this announcement, the balance of the ArcelorMittal Group Loan was
approximately R3.2 billion. This will allow the company to optimise its financial position before embarking on the capital
programme. Apart from the ArcelorMittal Group Loan, there is no other material long-term debt outstanding.
The Rights Offer will allow the ArcelorMittal Group to maintain its position as a major Shareholder of the company, which is
an advantage as the company values the involvement of the ArcelorMittal Group through its support as a key technology partner
allowing the company to receive leading technical support and benchmark its operations to international best practices.
Achieving the positive interventions noted in paragraph 1.1 will result in the company returning to a sustainable operational
state. All of these developments are expected to be concluded and announced to Shareholders by the time of the announcement
of the Rights Offer in January 2016, except for the additional specific "anti-dumping /safeguard duties" which may only be
finalised later in 2016, and are crucial for the ongoing sustainability of the company. The commencement of the Rights Offer
will be contingent upon achieving most of these interventions.
The proposed quantum of the Rights Offer, being in the amount of between R4.0 billion and R4.5 billion, is such that it will
result in the company issuing Shares that will, upon issue, have voting power in excess of 30% of the existing voting power
of the share capital of the company in issue. Therefore, in order to proceed with the proposed Rights Offer and comply with
section 41(3) of the Companies Act, 71 of 2008, the board requires the approval of Shareholders by special resolution, to
issue Shares with voting power that upon issue will exceed 30% of the existing voting power of the Shares currently in issue.
Accordingly, the board is convening a general meeting of Shareholders ("General Meeting") in order for Shareholders to vote
on the required resolution/s to give the board the authority to issue the necessary Shares for the proposed Rights Offer.
Further details of the proposed issue price and number of Shares, as well as the other salient terms of the proposed Rights
Offer will be provided in a further announcement, expected to be published in January 2016, and a further circular setting
out the full terms of the Rights Offer is expected to be issued at such time.
1.3 Irrevocable undertakings and letters of intent to vote in favour of the resolutions at the General Meeting
ArcelorMittal has received irrevocable undertakings or letters of intent from ArcelorMittal Holdings AG and a number of major
Shareholders to vote in favour of the resolutions to be proposed at the General Meeting. As at the date of this announcement,
this support amounted to a total of approximately 78.1% of the Shares in issue, net of treasury Shares.
1.4 Notice of General Meeting and salient dates
Notice is hereby given that the General Meeting will be held at the Hyatt Regency Hotel, 191 Oxford Road, Rosebank,
Johannesburg, on Friday, 11 December 2015 at 09:00 for the purposes of obtaining the approval of Shareholders by special
resolution, to the issue of Shares with voting power that upon issue will exceed 30% of the existing voting power of the
Shares currently in issue.
Shareholders are advised of the following salient dates and times with regards to the General Meeting:
2015
Record date to determine which Shareholders are eligible
to receive notice of the General Meeting Friday, 30 October
Circular posted to Shareholders on Monday, 9 November
Last day to trade to be eligible to vote at the General Meeting Friday, 27 November
Record date to be eligible to participate in and vote at the
General Meeting Friday, 4 December
Forms of proxy to be received by transfer secretaries by 09:00 on Wednesday, 9 December
General Meeting to be held at 09:00 on Friday, 11 December
Results of the General Meeting released on SENS on Friday, 11 December
2. Proposed B-BBEE transaction
Shareholders are referred to the cautionary announcement released on SENS on 30 September 2015 regarding the company’s
B-BBEE transaction ("the B-BBEE Transaction").
2.1 Proposed B-BBEE Transaction
As part of ArcelorMittal’s initiatives in transforming the company it is proposed that the B-BBEE Transaction is undertaken
to achieve a sustainable 25% black ownership in the company in order for the company to maximise its score under the B-BBEE Codes
of Good Practice.
The company is currently engaging with a number of shortlisted potential B-BBEE investors. The shortlisted potential B-BBEE
investors have begun their due diligence processes, with a final offer expected in early December 2015.
The company’s preference is for prospective B-BBEE investors to provide their own unencumbered equity funds for the investment,
which will be made through a proposed B-BBEE special purpose vehicle ("B-BBEE SPV"). The board is also considering the
opportunity to further increase the equity participation of the employees of the company, held via the lkageng
Broad-Based Employee Share Trust, through an investment in the B BBEE SPV.
2.2 Funding for the B-BBEE Transaction and the proposed B-BBEE Transaction structure
To the extent that there is a shortfall between the capital committed by black investors, and the funding required to execute
the B-BBEE Transaction, it is anticipated that the market will be approached for potential funding support ("B-BBEE Funding")
which may include the use of B BBEE SPV cumulative preference shares or other appropriate funding mechanisms.
To the extent that the B-BBEE SPV entity is "under water" (i.e. the value of the liability of the B-BBEE Funding exceeds the
value of the underlying investment in ArcelorMittal at the end of the period), ArcelorMittal will provide a guarantee in favour of
the B-BBEE Funding providers to issue such amount of Shares as will be required to settle the B-BBEE SPV’s obligation relating to
the B-BBEE Funding.
The final amount of B-BBEE Funding to be raised will be influenced by the prevailing Share price at that time, and the extent to
which the company is able to solicit fully funded offers from prospective black investors.
The issue of Shares to the B-BBEE SPV will require the approval of Shareholders.
Further details of the proposed B-BBEE Transaction, structure and funding will be provided in a further announcement, expected to
be published in the first quarter of 2016.
3. Potential debt raising
In considering the optimal structures for the financing of the company, the possibility of raising further debt finance has not
been excluded, including a possible offering of debt/notes on the international capital markets. Further details of any additional
debt financing (if applicable) will be provided in a further announcement in due course.
4. Renewal of cautionary announcement
Shareholders are advised that the full terms and salient dates and times of the proposed Rights Offer will be announced in
January 2016. The full terms and salient dates of the B-BBEE Transaction will be announced later in the first quarter of 2016.
Shareholders are accordingly advised to continue to exercise caution when dealing in the company’s securities until further e
announcements ar made.
Vanderbijlpark
6 November 2015
Investment bank, corporate advisor and transaction sponsor in relation to the Rights Offer
Nedbank Corporate and Investment Banking
Legal advisor in relation to the Rights Offer
Edward Nathan Sonnenbergs Inc.
Corporate advisor, transaction sponsor and legal advisor in relation to the B BBEE Transaction
KPMG Services (Pty) Ltd
Date: 06/11/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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