ArcelorMittal wins Essar Steel auction with £4.20 bn bid

Wednesday 31st October 2018 06:17 EDT

ArcelorMittal has stated that Essar Steel creditors voted in favour of its £4.20 billion bid and have issued a letter of intent to sell the asset to the company. The development indicates that the lenders haven't entertained the Ruia family's £5.44 billion last minute settlement offer and the former owner is set to move the court on this. While the creditors have approved ArcelorMittal's proposal, the Essar Steel transaction also requires the consent of the National Company Law Tribunal (NCLT) before the world's largest steel producer becomes the owner of India's No. 3 maker of the metal, which has an annual capacity of 10 million tonnes.

The $69 billion ArcelorMittal, which is controlled by India-born Lakshmi Mittal, the London billionaire, said it expects the approval from the NCLT to come before the end of the year. The Ruias plan to challenge the decision by early next week. They also await formal response from the creditors on their £5.44 billion settlement offer, which was made under section 12A of the bankruptcy code in a bid to take the company out of the insolvency net. While questions were raised on Ruias making an offer in the final stages of the bankruptcy proceedings, sources close to the family said they had a small window to make such an offer as the Numetal case was pending before the Supreme Court till about three weeks ago.

The family had a stake in Numetal, which was led by Russian bank VTB, and had put in a bid for Essar steel through it. However, they had to divest their stake in Numetal as the bankruptcy code disallowed promoters of insolvent companies from participating in the auction process of their own assets. The SC has directed Numetal to clear the pending dues of Essar Steel before putting in a bid for the troubled steel maker. Sources said, “Since Rewant Ruia (son of Essar Steel co-founder Ravi Ruia) was a part of Numetal, the family couldn't make an alternate offer.”

ArcelorMittal, which has tied up with Nippon Steel and Sumitomo Metal Corporation for the Essar Steel transaction, will be infusing an additional £800 million in the Indian company to support operations, increase production and enhance profitability. The joint venture, which will finance the £5 billion transaction through one-third of equity and two-thirds of debt, will help in fulfilling Lakshmi Mittal's more than a decade-old ambition of owning a large steel mill in India.

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