ArcelorMittal, VTB Group Are Said to Compete for Essar Steel

14 February 2018

ArcelorMittal is competing with a consortium led by Russia’s VTB Group as bids come in for Essar Steel India Ltd., the largest distressed steelmaker being sold under the country’s insolvency process, people with knowledge of the matter said.

An Indian unit of ArcelorMittal, the world’s biggest producer of the alloy, submitted an offer, it confirmed in a statement Monday. Essar Steel could fetch a valuation of at least $6 billion in a sale, the people said, asking not to be identified because the information is private. Essar Steel received only two bids by the Monday deadline, after domestic rival Tata Steel Ltd. decided against pursuing an offer, according to the people.

A new Indian bankruptcy law designed to clear out distressed companies has set off a contest for more than $26 billion of steel assets, spurring interest from foreign and domestic metals giants. Essar Steel has been hurt by weak demand and reduced gas supply that affected production. The company was owned by billionaire brothers Shashi and Ravi Ruia before being brought under the insolvency resolution process in August.

ArcelorMittal partnered with Nippon Steel & Sumitomo Metal Corp. for its offer, according to the people. The Luxembourg-based steelmaker has a majority stake in the bidding consortium and was considering making an all-cash proposal, one of the people said earlier.

The VTB consortium has submitted a bid through a Mauritius-based investment vehicle called Numetal, in which the Russian financial group is the largest shareholder, the people said. The investor group is also backed by Ravi Ruia’s son, Rewant Ruia, as well as a couple other partners, the people said.

Steel Recovery

Buoyant prices for steel and the prospect of rising demand, powered by Prime Minister Narendra Modi’s plan to spend trillions of rupees to upgrade India’s infrastructure, have been key attractions for the bidders. Essar Steel has claims of about 518 billion rupees ($8.1 billion) that have been admitted under the insolvency process. Times of India reported the planned bids earlier, citing unidentified people.

Representatives for ArcelorMittal and VTB declined to comment. A representative for Essar Steel didn’t immediately respond to a request for comment, while a representative for Tata Steel said he couldn’t immediately comment. Numetal said in an emailed statement it’s considering submitting a resolution plan for Essar Steel, and a decision regarding the price will be taken by its board later. Representatives for Nippon Steel didn’t reply to requests for comment during a Japanese public holiday.

Improving Performance

ArcelorMittal’s offer included a detailed plan for Essar Steel aimed at improving its performance and profitability, according to the statement, which didn’t disclose details of the plan or whether the company was bidding as part of a consortium.

Last month, ArcelorMittal announced its highest annual profit since 2011. Improved global steel markets also helped it win an investment-grade rating after a six-year wait. The company last week transferred its 29.1 percent stake in Uttam Galva Steels Ltd. to other founders, a move that analysts saw as a sign of the European giant’s plan to bid for Essar Steel.