Should the submitted resolution plan be selected and formally accepted by India’s National Company Law Tribunal, ArcelorMittal and NSSMC would jointly acquire and manage Essar Steel.
Steel giant ArcelorMittal has signed a joint venture (JV) formation agreement with Japan’s Nippon Steel & Sumitomo Metal Corporation (NSSMC) to acquire and manage Essar Steel, currently undergoing proceedings under the Insolvency and Bankruptcy Code (IBC), subject to approval of its bid from regulatory authorities.
ArcelorMittal’s subsidiary, ArcelorMittal India Private Limited (AMIPL), gave a resolution plan on February 12, which outlined its intention to have NSSMC formally join its bid for Essar Steel. Sources said since it was already mentioned in the resolution plan, no alteration was required in the wake of the JV formation agreement.
Should the submitted resolution plan be selected and accepted by the National Company Law Tribunal (NCLT), ArcelorMittal and NSSMC would jointly acquire and manage Essar Steel, ArcelorMittal said in a statement. NSSMC said it would proceed with ArcelorMittal to form the joint venture and acquire Essar Steel subject to the approval of the regulatory authorities.
In the JV, ArcelorMittal will be the majority partner. The announcement of the JV formation agreement with NSSMC comes shortly before a meeting between the resolution professional and lenders, in which the eligibility of the two bidders — ArcelorMittal and Numetal — will be taken up. The meeting is scheduled for March 5.
Essar Steel was among a dozen of biggest loan defaulters identified by the Reserve Bank of India for immediate resolution under the IBC.
Commenting on the development, Lakshmi Mittal, chairman and CEO, ArcelorMittal, said, “Partnering NSSMC for Essar Steel was always our intention and adds further strength to our offer. Combining our experience and expertise creates a powerful partnership that has a proven track record – our rich history of positive collaboration dates back more than 20 years with three joint ventures in the US. We believe that together we can contribute our knowledge and technology to support a rapid turnaround in Essar’s performance, enabling it to increase production, enhance its product capabilities and make a meaningful contribution to the future growth of India’s manufacturing sector and the development of its economy.”
ArcelorMittal and NSSMC have been operating I/N Tek and I/N Kote in Indiana, USA, under joint venture agreements since 1987. I/N Tek and I/N Kote are value-added downstream finishing facilities that serve the automotive and domestic appliance markets. Also, in 2014,ArcelorMittal partnered NSSMC on the acquisition of AM/NS Calvert, a state-of-the-art downstream finishing facility in Alabama, USA.
In a statement, NSSMC said India was one of the most promising steel markets in the world, with significant growth potential in the medium- and long-term and where domestically produced steel products had a superior position.
“NSSMC has been steadily expanding local production in India and targeting sectors advantageous to NSSMC’s technological superiority. Meanwhile, NSSMC has also been seeking opportunities to engage in integrated steel production in India to steadily capture the growing demand for steel products, which is expected to increase along with the development of domestic infrastructure.
ESIL (Essar Steel) is one of the major steel companies in India having a fully integrated steel production system located in the west coast region of India,” said NSSMC.
Essar Steel has a steelmaking capacity of around 10 million tonnes annually.