CSN has tempted steelmakers by touting Namisa's huge growth potential

Tag : white iron
The shake-out of bidders forBrazilian iron ore miner Namisa has left a number of contenderswith deep pockets and big appetites, sources familiar with thebidding said, signalling that owner CSN may sell a majority stake.
Some analysts estimate the sale could value Namisa, the smaller ofCSN's iron ore units as high as $10 billion, but at least oneanalyst said price expectations were getting way out of hand.
CSN has taken advantage of a white-hot iron ore market and tempted steelmakers by touting Namisa's huge growth potential.
Top global steelmaker ArcelorMittal, one of the world's mostacquisitive companies, is among a clutch of firms still in thechase after final bids went in earlier this month, according tosources familiar with the sale process.
Arcelor showed its keenness last month when it agreed to pay $810 millionfor the Brazilian iron ore assets of London Mining Plc, 50 percentabove the company's entire market value, and to build a $250million port shipping 10 million tonnes a year.
Ranged against it are India's Tata Steel Ltd and Japan's top fivesteelmakers, together with trading house Itochu Corp. Severalsources said a consortium led by China's top private steelmakerShagang Group was also still in the hunt.
That line-up points to a bigger rather than smaller stake.
"If they are going to sell the whole thing, it's going to favourArcelor or the Japanese. If it's a minority stake, then theChinese," said one investment banker in the sector, who declined tobe named.
All are hungry and have access to generous funding. Bankers sayJapanese firms are getting more assertive in the face of Chinesecompetition for assets globally, while Tata Steel, part of the muchlarger Tata Group, is seeking private equity investment that onebanking source put at $2-3 billion.
Shagang's finances are unclear, though it could attract the backingof a state bank, with almost limitless funding.
CSN and its advisor Goldman Sachs (nyse: GS - news - people ) want to sell 40-50 percent of Namisa but have complicated thesale, which should yield a winner within a month, by saying theywould entertain bids for the whole unit. Neither would comment onthe sale.
CHINA, RUSSIA OFF THE PACE
Other early bidders such as Beijing-based steelmaker Shougang Groupappear to have fallen off the pace. Bankers say China's statefinanciers are increasingly cautious about overpaying.
"Chinese planners are aggressive, but they don't want to be thestupid money. Ultimately the Chinese buyers have very strong viewsabout value," said an investment banker focusing on China.
And Russia's Severstal , which has made a string of acquisitions this year, has alsoappeared to rule itself out.
"If an opportunity comes up, we'll take a look at it, but there isno major acquisition currently in our (planning)," Severstal chieffinancial officer Sergei Kuznetsov told an analysts' conferencecall last week, according to a transcript from Thomson ReutersStreetevents.
One potentially unappealing aspect of Namisa is the need tocooperate with CSN on port access, which one Japanese tradingcompany executive said had put his firm off entering the bidding.
"A lot of people are concerned about getting into bed with CSN,"said a source involved in Namisa bidding. With that in mind,several observers expressed surprise at Arcelor's interest.
"Arcelor would be basically at the behest of CSN," said anothersource in the bidding. "Arcelor is looking for optionality at agood price."
Namisa's value depends on iron ore prices and its productiongrowth. CSN has touted a long-term plan to boost Namisa's outputfrom 7 million tonnes this year to more than 40 million tonnes.
Analysts at Merrill Lynch (nyse: MER - news - people ) said the price of Arcelor's London Mining deal, equivalent to$175 per tonne, would value Namisa at $7 billion, adding 20 percentto CSN's share price and triggering a revaluation of its main ironore unit Casa de Pedra.
But HSBC (nyse: HBC - news - people ) analyst Fabiano Santos sounded the alarm, writing in a note toclients on Sept. 8 that Namisa was worth only $1.8-2.6 billion,with a chance that no deal would materialise.
The 40 million tonne target referred to overall sales or exports,rather than production, he said, so that the business on offer waslargely a low-value trading firm, re-selling ore from Casa de Pedraor third parties, rather than actual production.
However, he also raised his rating on CSN's shares to an"overweight" from "neutral", citing the market's overly pessimisticview of steel and iron ore prices. (Additional reporting by YukoInoue in Tokyo, editing by Will Waterman) Copyright 2008 Reuters, Click for Restriction