ArcelorMittal advances into steel distribution
Valor Econômico - 04/04/2008
The acquisition of half the capital of the Gonvarri Brazil, a company of the Spanish Gonvarri group, by world giant ArcelorMittal metal works company can open a season for mergers and acquisitions in the distribution and service center business of plain steels in the country. This sector is still greatly fragmented and, except for some companies linked to the steel plants, dominated by traditional family groups. With the acquisition, the steel giant, owner of almost 9% of the steel produced in the world, has almost 12% of the sales of plain steel in the country, according to the 2007's data of the National Institute of Steel Distributors (Inda). The group already operated in Brazil through the old Belgo-Mineira, which, in 2005, began Arcelor Brazil, after the merger with CST and Vega do Sul, and currently is among the 10 largest companies in the national ranking of distributors. Frefer's president and shareholder and Inda's controller, Christiano da Cunha Freire, does not have any doubts that the distribution sector will live a season of asset consolidation. So far, from more than 30 companies, five are linked to large groups - Usiminas, CSN, and ArcelorMittal. The others, including Comercial Gerdau, are in the team of the independent ones. "The range of the business changes levels, which will demand more scale from all players so that they can compete", he affirms. ArcelorMittal acquired 50% of Gonvarri Brazil in order to form a joint venture working in steel distribution and service centers, advancing in the metal works chain, with control of the sales channels and getting closer to the customers, mainly the automobile assembly plants and manufacturers of household electric goods (refrigerators, stoves, and freezers, among others). With this purchase, the company explained in a note, the intention is to have strong presence in the Brazilian plain steel segment. The financial terms of the agreement were not revealed. Gonvarri Brazil - with operations in the state of Paraná, next to the Renault plant, and in the municipality of Campinas (SP), where it has a center of services - is one of the main companies in the segment of metal works services' rendering and serves customers of the automotive, industrial, and distribution areas, informed ArcelorMittal. The group remembered that it has stockholding in the Gonvarri Holding and has had a close relationship with it for some years, including a common installation in Scenic, Slovakia, since 2007.