Gupta’s GFG Still Eyeing M&A Deals Amid Pandemic-Led Distress

(Bloomberg) -- GFG Alliance, owned by commodity trader-turned-serial dealmaker Sanjeev Gupta, is looking at opportunities to acquire more assets amid the coronavirus pandemic.

GFG is a “very active group in M&A,” Chief Investment Officer Jay Hambro said in an interview. While the company is currently preoccupied with a planned purchase of the Duffel aluminum rolling plant in Belgium, “we keep an eye on other opportunities.”

The coronavirus outbreak has dampened demand for industrial materials, such as steel and aluminum. Nationwide lockdowns -- aimed at curbing the spread of the pandemic -- have reduced global trade and travel. They have also depressed sales of cars, ships and airplanes and delayed many large-scale projects.

“The aluminum market has faced considerable trauma because of this pandemic,” Hambro said. “And that has hit a lot of producers hard.”

Gupta has been on a buying spree in recent years, snapping up distressed steel and aluminum assets during the 2015 and 2016 commodity crisis. It made additional deals later on, as prices and markets recovered.

The growing scale of Gupta’s operations have led to questions about funding and finances, especially after the recent slump in global manufacturing. The GFG group, which employs 35,000 people globally, said last month it’s targeting “up to 30% overall efficiency gains” and cannot avoid job cuts with steel and aluminum demand hit hard by the health crisis.

GFG aims to tap capital markets for its companies -- Liberty Steel Group, Alvance Aluminum and SIMEC -- which is active in the renewable energy, shipping and infrastructure sectors. This could be done through share sales or issuing debt, Hambro said. However, there are no immediate plans to do that.

Meanwhile, the group’s steel and aluminum units have both pledged to become carbon neutral by 2030, which should make them more attractive to investors. The global aluminum market is in surplus amid overcapacity in China. However, supply of low-carbon material lags demand, including from customers which want to switch from steel to aluminum, Hambro said.

The Duffel deal, in the middle of an antitrust approval process, will add to Alvance’s recycling capacities.

While Gupta is best known for his deal-making spree in the steel industry, the company is looking closely at opportunities to acquire additional aluminum assets, Hambro said. Like its rivals, Rio Tinto Plc., Norsk Hydro ASA and United Co. Rusal Plc, GFG sees opportunities for growth in a nascent market for so-called green aluminum. Even so, it would consider buying assets currently powered by fossil fuels or using other carbon-intensive processes, if the company sees potential to switch to operating in a greener way later on. GFG is already doing this with steel assets in Romania and South Australia, Hambro said.

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