Vallourec unveils 1 bln euro capital hike, industrial shake-up

domingo 31 de enero de 2016 20:26 GYT
 

PARIS Feb 1 (Reuters) - Troubled French pipe maker Vallourec announced on Monday plans to raise 1 billion euros ($1.1 billion) in new capital and boost earnings through an industrial shake-up that will see it reduce its production capacity in Europe by half.

Vallourec, whose steel pipes are used chiefly in the oil and gas industry, has been hit hard by plunging oil prices. Its shares were suspended on Friday after a drop of more than 14 percent to just over 4 euros following a Bloomberg report that it was preparing a capital increase.

The company said the capital increase was supported by French state bank BPI France and Japan's Nippon Steel & Sumitomo Metal Corp, which would participate in a reserved equity instrument, in the form of a convertible bond, priced at 11 euros per share through which they would increase their capital stake to 15 percent each.

The overall capital increase would be split between the reserved equity instrument and a rights issue, Vallourec said, giving a midpoint scenario of 490 million euros for the reserved part and 510 million for the rights issue, of which 445 million would be subscribed by the market.

French business newspaper Les Echos had on Sunday reported that Vallourec would launch a capital hike worth up to 1 billion euros, along with an industrial restructuring in Europe. The daily Le Figaro had a similar report.

The industrial restructuring would halve European pipe-making capacity through the closure of two rolling mills in France, one threading line in Germany and a heat treatment line in Scotland, leading to the loss of about 1,000 jobs in addition to previously announced cuts, Vallourec said.

In Brazil and China, it plans to create improved production hubs by merging Vallourec & Sumitomo Tubos do Brasil and Vallourec Tubos do Brasil, and through the acquisition of Tianda Oil Pipe in China, the company said.

The changes to its Brazilian operations will lead to the closure of two blast furnaces and one steel mill over 2016-2018, in order to concentrate all steel production at the Jeceaba facility.

The restructuring measures are intended to generate around 750 million euros in additional earnings before interest, tax, depreciation and amoritisation (EBITDA) by 2020, thanks to measures implemented by end-2017.

A shareholders meeting will be convened on April 6 so that shareholders can vote on the equity issuance. The equity issuance is to be carried out in the second quarter, subject to market conditions, Vallourec said. ($1 = 0.9237 euros) (Reporting by Gus Trompiz; Editing by Jonathan Oatis)