Tata Sponge Iron Limited, a subsidiary of Tata Steel, will carry out the acquisition of Usha Martin's steel business, Tata Steel said in an official notification to the stock exchanges on Wednesday.

This pertains to Tata Steel's announcement on September 22, 2018 that it had executed definitive agreements for acquisition of the steel business of Usha Martin Limited (UML) by itself or any of its subsidiaries or affiliates.

"The board of Tata Sponge after having evaluated independently the asset perimeter, financial forecasts, synergies, prospects and the risks of the proposed acquisition along with the possible funding options, has on October 24, 2018 resolved that it will seek to acquire the business through a slump sale process and has accordingly executed a novation agreement with Tata Steel and UML," an official statement said.

The steel business undertaking of UML comprises of a specialised one million tonne per annum alloy based manufacturing capacity in long products segment based in Jamshedpur, an iron-ore mine, a coal mine under development and captive power plants.

Consequently, definitive agreements signed between Tata Steel and UML in relation to the acquisition shall be adapted accordingly. The closing of the acquisition remains subject to execution of definitive agreements between Tata Sponge & UML and fulfilment of various conditions under the said agreements, including regulatory approvals required for the transfer of the steel business, the statement added.

Tata Sponge Iron, a 54.5% subsidiary company engaged in the sponge iron business, has been evaluating various strategic options to enhance its product portfolio and has identified an entry into steel manufacturing in long products as a route to ensure sustainable value creation for its shareholders.

Tata Sponge has a debt free capital structure and free cash reserves of around Rs 670 crores. It is therefore ideally placed to enter steel manufacturing with a focus on the attractive speciality long products portfolio, the statement added.

As the promoter shareholder of Tata Sponge, Tata Steel has agreed to support Tata Sponge's strategy and has identified it as the strategic vehicle to undertake the acquisition of the steel business of UML, it further added.

 

Source: economictimes.indiatimes.com

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