Billionaire NRI Laxmi Mittal said on Sunday that ArcelorMittal's acquisition of ThyssenKrupp AG's (TKAG) 5.3 million-tonne (MT) steel mill in the United States for $1.5 billion will help the firm cash in on the growing demand for auto-grade steel in North American Free Trade Agreement (NAFTA) region.
"The acquisition expands ArcelorMittal's capability to serve and develop growing NAFTA demand for high added value products from a region we are currently under-represented," Mr Mittal said at a conference call, a day after announcing the acquisition.
He said the auto sector in the region which includes US, Canada and Mexico is expected to grow by 15 per cent in next 10 years.
"We believe with this acquisition, we will able to participate in this growth. We need to participate in that growth by providing superior quality of steel. Energy sector sector also requires high-grade steel," he said.
ArcelorMittal, the world's largest steel maker, through a 50:50 joint venture with Japan's Nippon Steel & Sumitomo Metal Corporation had on Saturday said it would buy TKAG's US steel mill for $1.55 billion
The plant at Calvert, Alabama, has a capacity of 5.3 mtpa. TKAG is Germany's largest steel maker.
Mr Mittal said the deal is likely to be sealed in the second quarter of 2014 as he did not anticipate any regulatory issues that may derail the deal.
"This is a strategic investment for ArcelorMittal. It is expected that acquisition will be EBITDA-accretive in the year one and and cash-flow accretive in the year two."
The deal would be financed in the 2:1 debt-equity ratio which will work out to be a little over $250-million cash investment from ArcelorMittal's side.
The transaction is expected to deliver $60 million of annual synergies and includes a six-year agreement to purchase 2 million tonnes of slab annually from ThyssenKrupp's Brazilian unit, using a market-based price formula, he said.
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