Material Fact
Strategic Alliance
São Paulo, November 30, 2015 – COMPANHIA SIDERURGICA NACIONAL (BOVESPA: CSNA3; NYSE:SID), following the material fact published on December 12th of 2014 (Material Fact 12/12/2014), hereby informs its shareholders and general public the following:
- We are concluding on this date the establishment of a strategic alliance between CSN, ITOCHU Corporation, JFE Steel Corporation, POSCO, Ltd., Kobe Steel, Ltd., Nisshin Steel Co, Ltd. and China Steel Corp. (“Asian Consortium”) through the combination in a new company, Congonhas Minérios S.A. (“Congonhas Minérios”), of the mining and correlated logistic assets of CSN and Nacional Minérios S.A. (“Namisa”) including Casa de Pedra, Engenho and Pires mines and related assets, rights to operate the port terminal TECAR located in Itaguaí (“TECAR”) and 18.63% of MRS Logistica S.A. (“MRS”).
- The reference value to determine transaction exchange terms, set as a result of the evolution of negotiations between CSN and the Asian Consortium during the last years, is USD16 billion. Considering all contributions made by the parties in Congonhas Minérios, the shareholding stakes of CSN and Asian Consortium, on a debt and cash free basis (enterprise value), where established at 84.25% and 15.75%, respectively. Debt, cash, working capital and other adjustments were made, including the allocation of USD 850 million of debt by CSN to Congonhas Minérios. The aforementioned negotiations also included the acquisition by CSN of 4% equity stake in Congonhas Minérios from the Asian Consortium for USD680 million, which resulted in the final equity stakes in Congonhas Minérios of 87.52% for CSN and 12.48% for the Asian Consortium. The transaction also includes an earn-out mechanism, by which in case of a qualified liquidity event, under certain valuation parameters and within a defined time period, the Asian Consortium equity stake in Congonhas Minérios may be diluted.
- Congonhas Minérios will consolidate itself as a world-class mining company, positioned as one of the largest iron ore global players, with the fourth lowest cost of production and over 3 billion tons of reserves. Congonhas Minérios strengthens its competitiveness through fully integrated mining, rail and port operations. Additionally, Congonhas Minérios will benefit from iron ore offtake agreements to the Asian Consortium and CSN through the execution on this date of 40 year contractual arrangements. Congonhas Minérios will enjoy further opportunities to capture cost reductions and synergies, assuring long-term competitiveness. CSN has secured the right to use TECAR for raw materials imports through a long-term contract.
- The transfer of TECAR port terminal concession to Congonhas Minerios is at final stages of approval by regulatory authorities and will be concluded immediately after such approvals are obtained.
- The conclusion of the transaction, which includes the execution of all relevant documents and the financial settlement, is expected to occur on this date.
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