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Mittal’s Aperam Eyes Stainless Steel Tie-Up With Acerinox

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(Bloomberg) -- Aperam SA, the stainless steel producer spun off from ArcelorMittal SA, is considering a combination with Spanish rival Acerinox SA to create the biggest producer of the metal in Europe.

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“Aperam confirms that very preliminary discussions with Acerinox with respect to a possible transaction that may result in a business combination have been recently engaged,” the firm said in a statement Friday. Acerinox also confirmed the talks. Bloomberg News had earlier reported that the companies were studying a potential deal.

Any combination would require the backing of the Mittal family, which controls about 40% of Aperam, as well as Spain’s March family, which is the biggest shareholder in Acerinox with 18% through an investment vehicle, people familiar with the matter said before the statement.

No agreement has been reached on the “scope, structure or terms of any possible transaction,” Aperam said in today’s statement.

Aperam rose as much as 6.2% in Amsterdam on Friday, while Acerinox fell as much as 3.7% after share trading resumed following its suspension by the Spanish regulator. That valued the Madrid-based company at 3.2 billion euros ($3.4 billion). Aperam has a value of about the same amount.

A deal between Aperam, which was separated from ArcelorMittal in 2011, and Acerinox could draw “red flags” from European regulators, according to analysts at Jefferies Financial Group. That’s because the combined company would have an estimated 2.3 million tons of capacity in Europe with a 49% market share, leapfrogging Finland’s Outokumpu Oyj, the analysts said.

Acerinox is the No. 3 producer in Europe and a market leader in the US and South Africa, while Aperam is ranked No. 2 in Europe and the biggest producer in South America, according to Jefferies. Still, the “operational footprint overlap, even in Europe, is minimal as Acerinox’s production base is in Spain while Aperam’s is in France and Belgium,” the analysts said.

Both firms have seen their profits boom since the pandemic as stainless steel joined the wider surge in commodity prices. Demand for the alloy that’s used in everything from kitchen utensils to skyscrapers climbed as economies reopened, with supply struggling to catch up.

Steelmaking and stainless-steel production are two different industries. ArcelorMittal was founded in 2006 through the combination of Arcelor and Mittal Steel, which themselves were the product of earlier mergers.

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