the sector of mining was taken by surprise earlier in the week with rumors that a new acquisition being considered by one of the main companies in the segment.
On Monday (20), Reuters reported that the CSN (CSNA3) would be preparing an offer to acquire the Samarcocontrolled through a joint venture by OK (VALE3) and BHP Billiton, each with a 50% share. The news was confirmed by CSN itself, in a document sent to the market on Tuesday night (21).
CSN said it hired a financial advisor to evaluate the purchase, as well as the alternatives that “may eventually present themselves for acquisition” at the mining company.
Also last night, it was informed that Samarco and its creditors financial institutions agreed to initiate a mediation to seek a consensus for the restructuring of the company’s debt.
Mediation must be carried out at the business mediation center in Belo Horizonte. The parties involved must deliver a timetable for the negotiations until the beginning of next month.
There are those who may question Samarco’s purchase intention, since the company, which is still in the process of repairing damages caused by the disaster in Mariana (MG)entered into judicial recovery last year, accumulating debts of approximately R$ 50 billion.
The answer is simple: With Samarco, CSN will boost its iron mining and become one of the world’s leading companies in the segment.
Ilan Arbetman, analyst at Activate Investmentssays that the acquisition is strategic for CSN’s planning because it would place a premium product in the company’s portfolio.
Samarco would also benefit CSN’s operations if it takes into account the geographic synergies of this type of transaction, he adds.
Samarco owns the Ubu Complex, which is located in Anchieta (ES) and has four pelletizingwater treatment plants and a maritime terminal for the outflow of production.
Samarco is also present in Mariana and Ouro Preto (MG), where, through the Germano Mining Complex,, extracts and transforms a tailings into ore with high iron content.
In 2021, Samarco produces around 7.9 million tons of iron ore, mainly pellets. According to Great InvestmentsIf the company returns to pre-accident production capacity at Mariana of around 30.5 million tonnes of pellets, CSN would more than double its numbers at the mining unit.
Why don’t Vale and BHP want to sell?
With the buzz of the news of a potential offer by CSN, Vale and BHP went so far as to say that Samarco is not for sale.
The two companies defended that they are focused on “ensuring the sustainability” of Samarco, carrying out repair efforts that “are not addressed by the creditors’ plan”.
The creditors hold bonds issued by Samarco in the amount of R$ 24 billion, from loans made before 2015, explains Genial.
The creditors ended up not agreeing with Samarco’s recovery plan and presented an alternative plan – capitalization of 38% of the debt in the form of debentures, taking Vale and BHP out of the mining company’s management – to the judge.
“The plan is named as ‘Nova Samarco’, having as one of the objectives to seek a strategic mining investor (highly speculated to be CSN)”, highlights the brokerage.
In addition to debt restructuring issues, another point that may explain Vale’s reluctance to get rid of the asset is that Samarco remains important to the company’s business, says Arbetman, from Ativa.
“When we see the core of the strategy, the privilege of value over volume, we see the degree of relevance of Samarco for the company”, says the analyst.
Hard but not impossible
The conditions for the transaction to finally get the green light are not the best. Henrique Tavares, analyst DV Investdoes not see the conclusion of an agreement between the parties happening now.
The biggest barrier remains the size of Samarco’s liabilities, assesses the expert.
“Samarco listed around R$50 billion in defaulted debts during the filing for judicial recovery. Thus, the controlling shareholders (Vale and BHP) who have committed and reaffirmed this commitment to contribute to the payment to the company’s creditors must be more resistant to relinquishing control of the company”, he comments.
Despite this, it is not impossible for the agreement to happen. In the opinion of the Ativa analyst, other proposals could even be put on the table.
“We no longer know who might be watching from the outside. If a proposal goes ahead, there may be more people keeping an eye on this issue,” she says.
Genial assesses the potential acquisition as beneficial for CSN. According to the broker, adding, as of 2023, the increase in Samarco’s total capacity, the increase in CSN Mining (CMIN3), a subsidiary of CSN, would be close to R$9 per share.
For now, Genial has a “hold” recommendation for CSN shares, with a target price of R$26. For CSN Mineração shares, the recommendation is to buy, with a target price of R$7.
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