Deal of The Decade: Explanation of AMT Purchase

The transfer of assets of the ArcelorMittal Temirtau enterprise to a Kazakhstani investor has come to an end. Now AMT and Aqtay Pipe Plant’s stakeholder has become domestic entrepreneur, Andrey Lavrentiev.

Minister of Industry and Construction of the Republic of Kazakhstan, Kanat Sharlapayev, revealed the deal’s details. It turned out that it was more difficult and took longer (negotiations began in November 2022) than expected. The participants conducted 11-round negotiation process. 

Working It out

Kazakhstan, through the state direct investment fund, JSC Qazaqstan Investment Corporation, bought the ArcelorMittal Temirtau enterprise and the Aqtay Pipe Plant from ArcelorMittal Holding.

The government has made the subsequent sale of these assets, but not to Allur Group, but to Andrey Lavrentiev, who created a separate company for this purpose. Then, through the Astana International Exchange (AIX), he gathered the finances for the purchase and bought AMT and the pipe plant for $286 million. He has, however, also acquired its debt load — short-term ($250 million) and long-term ($450 million).

For investment, a new investor in AMT has created a separate special company, in which one investor is a single person — this is Andrey Lavrentiev. This company has issued bonds to the AIFC, attracted financing, invested its money, attracted private financing — for transactions of this scale, this is a very real situation. And (it -Ed.) bought out enterprises from the ownership of the Republic of Kazakhstan with investment obligations, obligations under safety requirements, social conditions, collective agreements, obligations to suppliers and customers, Minister Sharlapayev said at a briefing in Astana.

ArcelorMittal's equity decreased by $800 million after the deal. At the same time, the state reduced the value of assets from 3.5 billion to 286 million dollars. Sharlapayev called this a profitable deal, as the enterprise generates billions of dollars in revenue per year.

It can be concluded that ArcelorMittal's assets in Kazakhstan were worth $286 million to the state. In other words, what they bought for, they sold for. The Minister considers this outcome a success.

The first thing that happened was that the state bought this enterprise from AM at the price it announced. Now the government is selling it for the same money to an investor. The agreement between the Government of Kazakhstan and ArcelorMittal can be called a mega deal, it is of exceptional importance for our country. We have avoided a lot of risks that other governments have faced, the minister stressed.

At the same time, he noted that without the state’s participation, this "mega-deal" might not have happened. For ArcelorMittal, as a public company, it was important for the government to participate as a counterparty.

If the buyer were not the state, the price would be much higher, Sharlapayev noted. The authorities' participation helped to ensure ArcelorMittal’s structured exit with the maintaining of jobs and the enterprise’s efficiency. This was the main condition for the government. What kind of enterprise management structure Lavrentiev will create is up to him.

He must nonetheless fulfill his social and investment obligations to the letter. In particular, keeping the existing collective agreement and the employee remuneration system. And increasing the volume of products.

The company is also to undergo a rebranding and return its historical name "Qarmet".

RMB: News surfaced on December 08, 2023 that businessman Andrey Lavrentiev became the new investor of ArcelorMittal Temirtau. He acts as an independent Kazakhstani investor, his companies have no relation to this project. According to the terms, he will invest three billion dollars in the modernization of the plant and mines. One and a half of them, as previously reported, will immediately be in a single tranche.

Original Author: Ilya Astakhov

DISCLAIMER: This is a translated piece. The text has been modified, the content is the same. Please refer to the original piece in Russian for accuracy.