In line with its “Klöckner & Co 2020″ strategy, Klöckner & Co has started its planned entry into emerging markets by acquiring a 70% share of the third-largest independent steel and metal distributor in Brazil.

The acquisition is partly conducted by way of a capital increase at Frefer Group, and thus, further funds for expansion will be available in the company.

The Frefer Group is a flat steel focused distribution and service center company with around 360 employees at 14 locations in Brazil and 2010 sales of approx. 340 million reais (approx. €150 million). The company even outpaced the already strong market growth in recent years.

Gisbert Rühl, Chairman of the Executive Board of Klöckner & Co said the acquisition creates the Company’s first foothold in the emerging markets of South America.  Klöckner & Co is thus making a further important step in the implementation of its Klöckner & Co 2020 strategy after the acquisition of Macsteel USA a few days ago, said Mr Ruhl.

According to Ruhl, Klöckner & Co’s entry into the emerging markets is intended to help the Company pursue the goal of participating in the strong growth in steel consumption within the South America region and will put the Company into a better position to balance out the various world market phases.

The entry into the Brazilian market is particularly attractive, not least because of the increased steel consumption that will result from its hosting of the Soccer World Cup and the Olympic Games, noted Ruhl.

With Frefer, Klöckner & Co will take advantage of a strong market position right from the start, which will allow the company to participate disproportionately in the developments, said Ruhl.

The acquisition is taking place at a price that is 6.5 times the projected average EBITDA over a five-year planning horizon. The owner, who will retain ownership of the remaining 30% shares, will continue in his capacity as CEO of the company. Put and call options have been negotiated for the possible subsequent transfer of minority interests which guarantee exclusivity and whose parameters have already been determined.

The Frefer Group is the third-largest independent steel and metal distributor in Brazil. At 14 locations with its 360 employees, the company realized sales of approx. 340 million reais (approx. €150 million) in the fiscal year 2010.

Klöckner & Co is the largest producer-independent distributor of steel and metal products and one of the leading steel service center companies in the European and North American markets combined.