Gerdau sells stake in facilities in Colombia, Dominican Republic

Gerdau S.A., a Brazil-based steelmaker with facilities throughout the Americas, has entered into definitive agreements to sell its shares in two joint ventures (JVs) to its partner in those JVs—Dominican Republic-based asset management firm INICIA Group.

The agreement will see Gerdau divest from its 49.85 percent stake in the Diaco S.A. JV, including subsidiaries, and its 50 percent stake in the Gerdau Metaldom Corp. JV and its subsidiaries.

The two JV companies operate in Colombia, the Dominican Republic, Panama and Costa Rica. “The set of assets held by the aforementioned JVs comprises industrial units for the production of long steel with production capacities of 360,000 tons of steelmaking and 1.25 million tons of rolling [capacity],” Gerdau says.

The Diaco mill in Colombia melts and recycles some 350,000 tons of ferrous scrap annually in its electric arc furnace (EAF). Gerdau Metaldom handles about 50,000 tons per year of ferrous scrap in its network of yards.

“Over the last six years, the combined average earnings before interest, taxes, depreciation and amortization (EBITDA) of both operations was $134 million, with Gerdau’s share corresponding to approximately 50 percent of this generation," Gerdau says.

The company notes that for accounting purposes, the divested assets were part of its South America operations. INICIA will pay $325 million to buy Gerdau’s stakes, the steelmaker says.

Gerdau estimates the transaction will close later in the first half of this year upon fulfillment of the usual precedent conditions in operations of this nature, especially approval by the competition defense authority in Colombia.

The steelmaker portrays the transaction as “aligned with its capital allocation strategy, focusing on the growth and competitiveness of assets with greater potential for generating value in the long term,” adding the $325 million it receives will be used to execute the company’s strategic capital expenditures program.