ArcelorMittal, the world’s largest steel producer by sales, has joined in the bidding for India’s debt-laden Essar Steel ahead of today’s deadline.
Lakshmi Mittal, ArcelorMittal’s chairman, said that the proposed acquisition “provides a compelling opportunity for ArcelorMittal to enter the high growth Indian steel market” and that his group’s industry expertise made it “uniquely equipped to implement a successful turnround which would be beneficial to Essar’s stakeholders”.
Essar Steel is one of India’s largest steel producers, with annual production capacity of around 10m tonnes. Part of the debt-laden Essar conglomerate, the company was put up for sale last July by India’s central bank along with 11 other large companies under the country’s new bankruptcy law that aims to clear out financially distressed businesses.
Despite its debts Essar has attracted other suitors such as Russia’s VTB Group, which has formed a consortium with Essar’s controlling Ruia family and has been valued at upwards of $6bn according to reports.
Essar’s financial problems result from a big investment in developing its main plant at Hazira in India’s western Gujarat state, which coincided with weak demand, falling prices and gas supply problems.
However, bidders believe that both demand and prices are set to recover, helped by Prime Minister Narendra Modi’s plan to spend trillions of rupees in upgrading India’s infrastructure.
Luxembourg-based ArcelorMittal’s said that its offer for Essar included a detailed plan for improving the company’s performance and profitability.