Target Company Overview

ELG is a renowned global leader in the collection, trading, processing, and recycling of stainless steel scrap and high-performance alloys. Annually, the company delivers approximately 1.2 million tonnes of materials and employs around 1,200 full-time equivalent (FTE) employees across 51 locations in 20 countries. This extensive reach positions ELG as a key player in the recycling sector, specializing in high-quality materials that support various industries.

The business was valued at an Enterprise Value of EUR 357 million, with an equity value of EUR 30 million as of December 31, 2020. The acquisition employs a lockbox mechanism, wherein the parent company, Aperam, will benefit from the economic value added to ELG's operations starting January 1, 2021. ELG is anticipated to be fully integrated into Aperam’s operations as a new segment, Recycling, effective December 31, 2021, with an expected adjusted EBITDA of approximately EUR 65 million in 2021.

Industry Overview

The recycling industry, particularly in Europe, has seen significant growth driven by increasing environmental regulations and a shift towards sustainable practices. Governments are implementing stricter guidelines for waste management and recycling, encouraging companies to adopt more efficient processes. This trend is apparent in the steel industry, where recycled materials play a crucial role in production, allowing manufacturers to reduce carbon footprints.

In recent years, the demand for high-performance alloys and stainless steel has also surged due to the expanding electric vehicle market and renewable energy sectors. Countries are focusing on enhancing their recycling capabilities to mitigate reliance on virgin materials, further solidifying the importance of companies like ELG within this landscape.

The EU's Green Deal, which aims to make Europe climate-neutral by 2050, has further bolstered the recycling industry's prospects. These regulatory frameworks not only create a favorable business environment for the recycling sector but also facilitate investment into innovative recycling technologies and processes.

Overall, the recycling industry in Europe is poised for continued growth, fueled by both regulatory support and increasing market demand for sustainable practices. Companies that can effectively capitalize on these trends are positioned to thrive in this evolving landscape.

Rationale Behind the Deal

The acquisition of ELG presents a strategic opportunity for Aperam to enhance its sustainability initiatives and align with its CO2 reduction targets. By investing in sustainable recycling, Aperam will not only improve its environmental footprint but also leverage ELG's capabilities to optimize its input materials.

The expected synergies from the acquisition, estimated to amount to EUR 24 million within three years, highlight the potential for operational efficiencies and cost savings. Furthermore, integrating ELG into Aperam's operations will allow for improved raw material supply, ultimately creating competitive advantages in the market.

Investor Information

Aperam is a global player in the stainless steel and high-performance alloys sector, recognized for its commitment to sustainability and innovation. The company emphasizes reducing its environmental impact and enhancing its operational efficiencies through strategic investments and acquisitions.

With this acquisition, Aperam aims to solidify its position as a leader in sustainable practices within the materials sector, while simultaneously driving growth and value creation for its stakeholders. The integration of ELG aligns with Aperam’s financial policies and growth strategies, reinforcing its strategic focus on sustainability.

View of Dealert

From an expert perspective, the acquisition of ELG by Aperam represents a potentially strong investment opportunity. The move towards sustainable recycling aligns with global market trends and regulatory expectations, positioning Aperam to capture new growth avenues while also enhancing its environmental credentials.

The anticipated synergies of EUR 24 million within three years are promising, indicating that the integration of ELG could yield immediate financial benefits. Additionally, the expected increase in adjusted EBITDA from ELG suggests that the acquisition will be accretive to Aperam's overall financial performance in the short term.

Moreover, as recycling becomes increasingly crucial for maintaining resource sustainability, companies that adapt to these shifts will likely see enhanced market positioning. Aperam's focus on integrating high-quality raw materials through this acquisition further underscores its forward-thinking approach in a competitive marketplace.

In summary, this acquisition can be viewed as a strategically sound investment that not only aligns with Aperam's sustainability initiatives but also provides a pathway for improved operational efficiencies and enhanced value creation.

View Original Article