CSN’s board has approved a non-binding proposal with Japan’s Itochu Corporation for the sale of an 11% minority stake in CSN Mineração – an operation that will help deleverage Benjamin Steinbruch’s company, a major concern of the market.
CSN had been signaling to investors for some time that it wanted to sell a minority stake in the company, its mining subsidiary listed on the Stock Exchange in 2021.
Itochu is already the second largest shareholder of CSN Mineração, with 9.26% of the capital. They are only behind CSN, which holds 79.7% of the shares. Other relevant shareholders include Posco, with 1.86%, and China Steel Corporation, with 0.41%.
Steinbruch told Brazil Journal that Itochu had been asking for a long time to increase its stake in CMIN.
“We saw an opportunity to strengthen the business relationship with them and negotiate at a fair price that will help with deleveraging, which is a commitment we have made to the market,” he said.
The valuation of the transaction will only be public after the operation is approved by the assemblies of both companies and by CADE.
Steinbruch stated, however, that the sale was made at a premium to the market price.
The premium seems to be significant, as while the market projects a 0.3x reduction in CSN’s leverage with the sale at market price, Steinbruch said the reduction will be 0.5x.
Currently, the company’s leverage is 3.4x EBITDA, and the company aims to reduce this indicator to 2.5x.
CSN Mineração is valued at R$ 32.5 billion on B3, with the 11% stake being worth around R$ 3.6 billion at market price.
Safra said that even at market price, the transaction had a good valuation. “We appreciate the fact that the company was able to secure the sale at a very good valuation, with CSN Mineração trading at 6.2x next year’s estimated EBITDA, a 78% premium over Vale,” the bank wrote.
In addition to deleveraging, Steinbruch said the transaction is important because it could generate other businesses with Itochu.
“From this increase in stake in CMIN, we intend to generate other business opportunities, in trading, shipment, technology, and financial businesses,” the businessman said.
CSN has had a trading arm for a year now, and the idea is to accelerate the global expansion of this operation. Itochu could assist in this, even becoming a partner in this business. “It makes perfect sense to have an international partner, and we believe Itochu would be the best company for that,” he said.
CSN is also considering entering the shipment market, either by buying used or new ships, according to Steinbruch.
Today’s transaction comes at a time when CSN is negotiating the purchase of InterCement, which entered extrajudicial recovery a month ago with a debt of R$ 22 billion.
Steinbruch made a R$ 10 billion offer for the cement company in May, in addition to committing to assuming its debts. CSN has extended its exclusivity deadline in the negotiation – which would have expired today – until November 16, on the same terms as the original proposal.
Steinbruch said that the acquisition of InterCement is progressing, but there is a commitment not to increase leverage. “The financial structure we are putting in place and the EBITDA they will bring will allow us to make the acquisition while maintaining our level of leverage,” he said.
The entrepreneur also said that CSN has no plans to sell more of CMIN, as they believe strongly in the business.
“It was a sale to meet Itochu’s demand and in a broader negotiation for the expansion of our business abroad.”
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Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
