A Chinese consortium has paid $1.95 billion for a 15% stake in a Brazilian niobium producer, just a few months after a similar investment by a consortium of Japanese and Korean strategic buyers.
Companhia Brasileira de Metalurgia e Mineracao (CBMM) is the world’s biggest producer of niobium, a raw material used in steel-making. It is majority-owned by the Moreira Salles group, which also controls Unibanco, one of the largest banks in Brazil. The Chinese buyers are Taiyuan Iron and Steel Group, financial conglomerate Citic Group, Baosteel Group, Anshan Iron & Steel Group and Shougang Group. The deal has been in the works for more than two years, said a source close to the deal.
All the buyers, except Citic, are themselves consumers of niobium, added the source. Taiyuan Iron and Steel makes stainless steel; Baosteel is China’s second-biggest steelmaker; Anshan is an iron and steel producer; and Shougang is a Beijing-based steel producer. UBS worked on the buy-side representing all five buyers. Baker & McKenzie acted as international counsel to the consortium while Concord & Partners was PRC counsel and Machado Meyer was Brazil counsel.
CBMM owns the rights to the largest and highest-grade identified niobium reserves globally. It controls 80% of the worldwide production of niobium, which is used to make everything from super-alloys used in cars to oil and gas pipes, bridges and plane engines.
The deal was done on a negotiated basis between the principals, said a source. The transaction mirrors an investment by a Japan-Korea consortium in CBMM in March this year. Four Japanese companies — JFE Holdings, Nippon Steel, Sojitz Corp and Japan Oil, Gas & Metals National Corp — as well as South Korea’s National Pension Service and Posco, together bought a 15% stake in CBMM for $1.95 billion. Goldman Sachs represented all six companies on the March investment.
“The price was already on the table so the investment by the Chinese consortium would have been easier to close,” said a source not involved in the deal. But the source close to the deal said that the Chinese were also at the table when the Japanese-Korean consortium was in discussions with CBMM, so this is not a copycat trade. It is just the timing of various clearances that made the Japan-Korea deal close earlier.
Deutsche Bank worked with CBMM on both the first sale of a 15% stake to the Japan-Korea consortium and then on the current sale of a further 15% to the Chinese. Barbosa, Müssnich & Aragào was legal counsel.
The deal has been announced after completion, added the source close to the deal. All the investors as well as the target are unlisted so no prior intimation to any stock exchange was necessary. The seller decided to induct strategic investors to cement its relationship with key customers, added the source.
No information could be ascertained on what kind of board representation the buyers will get and what restrictions both buyer consortiums have agreed with respect to sale or transfer of their shares. The source added that a Chinese bank would be providing some debt financing to the buyer consortium, but declined to provide any further details, citing sensitivity.