23.06.2021. Befesa S.A., provider of hazardous waste recycling services enabling the circular economy within the steel and aluminium industries, has announced the signing of an agreement to acquire American Zinc Recycling Corp. (“AZR”), a US market leader in providing electric arc furnace steel dust (EAFD) recycling services.
Agreement
As part of the agreement, Befesa will acquire 100 % of AZR’s recycling assets for a purchase price of 450 million $ and a minority stake in AZR’s zinc refining business for 10 million $ with the option to acquire the remaining business once certain operational and financial performance milestones have been fulfilled. Through the acquisition of AZR’s recycling assets, Befesa will become a global leader in EAFD recycling with a balanced footprint across Europe, Asia and the US with twelve facilities offering c. 1.7 million t/a of steel dust processing capacity.
Electric arc furnace (EAF) is a prevailing steelmaking method in the US, representing more than 70 % of the total steel produced. As such, the US has one of the largest and growing markets of EAF steelmakers globally driven by the decarbonisation trend.
American Zinc Recycling
Headquartered in Pittsburgh, PA, AZR is a leading provider of environmental hazardous waste recycling services to the US steel industry with a processing capacity of c. 620,000 t/a of EAFD. AZR operates four EAFD recycling plants located in South Carolina, Tennessee, Illinois and Pennsylvania, near the major US EAF steel mini-mills.
AZR also has a zinc refining facility in North Carolina, centrally located between AZR’s recycling assets, which applies new solvent extraction technology to process Waelz Oxide (WOX) into special high-grade zinc (SHG). AZR’s zinc refining business provides Befesa with a strategic vertical integration opportunity to support its EAFD recycling operations in the US. As part of this transaction, Befesa secured an option for the acquisition of the remaining 93.1 % stake in AZR’s zinc refining business for a total consideration of 135 million $, only upon fulfilment of two-phased operational and financial performance milestones by the new refining plant, prior to 31 December 2023. The Sellers have a corresponding put option against Befesa. In addition, a potential earn-out of up to 29 million $ would be paid by Befesa only in the case of outstanding performance achieved by the zinc refining plant at the time of the second milestone payment. The milestone consideration as well as the earn out will be payable in cash or Befesa ordinary shares at the option of the Sellers.
Javier Molina, CEO of Befesa: “This transaction represents a great step forward in executing our strategy and in accelerating our growth globally. It brings together the two most established leaders in our respective markets to create a global EAFD recycling leader under the Befesa name. The terms of the deal are very attractive for all stakeholders and reflect our commitment to excellent capital allocation and cash management while diversifying the highest margin business unit and improving Befesa’s overall profitability. We are excited to continue contributing to the protection of the environment and delivering accelerated volume and earnings growth for our shareholders, with a globally well-balanced footprint across Europe, Asia and the US.”
The acquisition will be financed through a capital increase of up to 5,933,293 new ordinary shares from the existing authorised capital and a term loan B (TLB) add-on of 90 million €, maintaining Befesa’s leverage ratio at similar levels post acquisition. The new shares will be offered to institutional investors in a private placement by way of an accelerated book building process that will commence immediately after the publication of this announcement. The TLB add-on process will be launched tomorrow with commitments being due on 28 June 2021. For more information, please refer to the ad hoc announcement.
Transaction in Q3 2021
The transaction is expected to close in Q3 2021, subject to antitrust approval and other customary closing conditions. Citigroup is acting as global coordinator and sole bookrunner for the private placement of the New Shares.
(Source: Befesa S.A.)