ArcelorMittal and Nippon Steel complete acquisition of Essar Steel

ArcelorMittal, the world’s largest steel maker, officially set foot in India for the second time and in a much bigger way. It closed a Rs 42,000 crore deal with the lenders of Essar Steel along with Nippon Steel on Monday.

In a statement, ArcelorMittal said it had established a joint venture with Nippon Steel Corporation called ArcelorMittal Nippon Steel India (AM/NS India), which will own and operate ESIL.

ArcelorMittal holds 60 per cent of AM/NS India; the rest is with Nippon Steel.

ArcelorMittal announced that Aditya Mittal, president and CFO of ArcelorMittal, had been appointed chairman of AM/NS India and Dilip Oommen, the CEO.

Mittal's appointment, however, didn't come as a surprise for industry players. He had played a key role in the acquisition of Essar and was even spotted during some of the court hearings. Oommen was the current managing director of Essar Steel.

The Mittals and Nippon officials were expected to visit the plant at Hazira on Tuesday to take operational control.

The closing of the transaction is a huge leg-up for the Insolvency and Bankruptcy Code (IBC) even though it was achieved after 865 days with financial creditors realising more than 90 per cent of their admitted claims.

The total admitted claims of financial creditors was Rs 49,473 crore of which State Bank of India (SBI) had the largest exposure at Rs 13,226 crore.

SBI, chairman, Rajnish Kumar, said at an event in New Delhi, "One of the most important, observed and commented case (Essar Steel) has been resolved today. It will boost the bank's profitability in the third quarter and will be a huge positive for the economy."

For the Hazira plant as much as for the Mittals, the resolution signals the start of a new chapter.

Commenting, Lakshmi Mittal, chairman and CEO of ArcelorMittal, said, “The acquisition of Essar Steel is an important strategic step for ArcelorMittal. India has long been identified as an attractive market for our company and we have been looking at suitable opportunities to build a meaningful production presence in the country for over a decade."

"Both India and Essar’s appeal are enduring. Essar has a sizeable, profitable, well-located operations and the long-term growth potential for the Indian economy and therefore Indian steel demand are well known," he added.

Lakshmi Mittal also said that the combined strengths of Nippon would bring many new opportunities which would allow it to make a positive contribution to India's target to grow steelmaking capacity to 300 million tonnes per annum by 2030 and for its manufacturing sector more broadly.

The acquisition makes AM/NS India the fourth largest steel producer in India and the largest steel company in western India. Its current level of annualised crude steel production is 7.5 million tonnes. Additionally, it also has iron ore pellet facilities in the east of India, with a current annual capacity of 14 million tonnes per annum.

Going forward, there are plans of ramping up capacity to 8.5 million tonnes over the medium-term; the long-term aspiration is to increase finished steel shipments to between 12 and 15 million tonnes. The resolution plan for Essar had indicated a capital expenditure plan of Rs 18,697 crore to be implemented in two stages over six years.

Aditya Mittal, President and CFO of ArcelorMittal, said, "This acquisition gives us the opportunity to contribute to India’s expansion in infrastructure and urbanization in the coming decades."

"To do this, we have in place a targeted capital expenditure plan designed to build on our combined management strength, operational expertise, commitment to safe, sustainable steelmaking and industry leading research and development," he added.

Eiji Hashimoto, Representative Director and President of Nippon Steel, said, Nippon Steel and ArcelorMittal would bring out AM/NS India’s potential by providing it with their respective business experience and world-leading advanced technologies, so as to promptly implement the resolution plan and realise its further business expansion.


Aug 2, 2017 Essar Steel admitted to NCLT
Feb 12, 2018 ArcelorMittal, Numetal submit bids for Essar Steel
Oct 4, 2018 Supreme Court grants ArcelorMittal and Numetal time to clear dues for NPAs to be eligible to bid for Essar Steel
Mar 8, 2019 NCLT clears ArcelorMittal plan
Jul 4, 2019 NCLAT approves ArcelorMittal bid with modifications in distribution of proceeds
November 15, 2019 Supreme Court sets aside the NCLAT order paving way for the deal
Big boost for IBC

Essar was one of the 12 big-ticket cases mandated for resolution by the Reserve Bank of India (RBI) under the IBC.

With its completion, there are now about six resolutions from the RBI's first list of non-performing assets (NPAs) with recoveries of 56.86 per cent of the admitted claims for financial creditors against an average of 42 per cent.

Lakshmi Mittal said the transaction demonstrates how India benefits from the Insolvency and Bankruptcy Code, a genuinely progressive reform whose positive impact would be felt widely across the Indian economy.

SBI chairman Rajnish Kumar pointed out that the Essar case had settled almost every issue in the IBC process.

There were several rounds of litigation in the case that tested many of the IBC clauses over the past two years.

Kumar, however, said that there was still hesitation from both borrowers and lenders’ end to take early advantage of the IBC process.

“An early resolution is a good way to preserve the economic value of the enterprise. It’s important to resolve early,” Kumar said. He further said that there should be no stigma attached to the bankruptcy process.

“Nowhere in the world do we have this stigma. It’s a natural process that some businesses will survive and some will fail. It’s ultimately the survival of the fittest,” Kumar explained. However, Kumar felt that the IBC was not suitable for the resolution of micro, small and medium enterprises (MSMEs).

“It is more for the bigger corporates. MSMEs should have a rehabilitation. We are not in favour to take them to the NCLT because it will burden the system unnecessarily," Kumar said.

Lenders declare ArcelorMittal highest bidder for Odisha Slurry Pipeline

ArcelorMittalhas emerged the preferred bidder for Odisha Slurry Pipeline Infrastructure (OSPIL). At a meeting of the committee of creditors on Friday, lenders declared ArcelorMittal the highest (H1) bidder, according to the head of a public sector bank with exposure to the company.
Lenders favoured ArcelorMittal’s upfront offer for the slurry pipeline. “Arcelor’s offer was better than Thriveni’s,” said the lender. Thriveni Earthmovers made a surprise offer at Rs 4,000 crore recently. It’s not clear whether Arcelor, which had earlier offered Rs 2,350 crore, revised or improved the bid. ArcelorMittal didn’t comment.

Thriveni had sought a waiver from furnishing a letter of commitment and lenders were hesitant to agree on that, a source in the know said. The total admitted claims of OSPIL’s financial creditors were pegged at Rs 2,660 crore. Originally, Thriveni had made a Rs 8 crore upfront offer for the slurry pipeline though its total bid stood at Rs 3,300 crore to be made over a period of time.
As far as Thriveni’s condition was concerned, one of the lenders explained that a letter of commitment was a definite prerequisite and bidders could not be exempted. “It is a usual practice for banks to ask resolution applicants to provide letter of commitment,” the lender said.
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OSPIL — which owns a 253-km pipeline connecting the site of Essar’s iron ore beneficiation plant in Dabuna with the 12-million-tonne pellet plant in Paradip — is a critical asset for Essar Steel. In fact, the Essar Steel resolution professional had petitioned before the National Company Law Tribunal (NCLT) for declaring the pipeline an asset of the steel maker.
The NCLT, however, in its order dated February 2018, had rejected the prayer, saying the applicant cannot claim ownership of the pipeline. Essar Steel owns about 31 per cent in OSPIL while the balance is held by India Growth Opportunities Fund (IGOF), a scheme of Srei Multiple Asset Investment Trust (SMAIT).
The week began with a quick series of events on the slurry pipeline front. First, IGOF wrote to the CoC and the resolution professional requesting withdrawal from CIRP (corporate insolvency resolution process).
The pipeline is leased to Essar and the arrangement between the company and OSPIL is captured in the Right to Use Agreement (RTU). According to the IGOF, the usage charge was adequate to repay the entire debt along with interest to lenders, as well as investments made by IGOF while CIRP would result in lower recoveries.
Then Thriveni came up with a revision in its offer. Finally, lenders have gone ahead and accepted Arcelor's offer. The pipeline, however, is unlikely to be the last stumbling block in Arcelor's plans for Essar Steel as it has other ancillary units like power plants and port that are not included in its assets.
ArcelorMittal has fought a long and protracted battle for Essar Steel for the past two years which finally concluded with the Supreme Court paving the way for the Rs 42,000-crore transaction, which is expected to close by the end of December.

India eyes Asian steel mills for JV with SAIL on ArcelorMittal deal delay

India is in talks with Japanese and South Korean mills for a joint venture with state-run Steel Authority of India Ltd. as years of delays hold up a deal with the world’s biggest steelmaker ArcelorMittal.
The steel ministry is in talks with mills including Nippon Steel Corp., Mitsubishi Steel Manufacturing Co. and Posco for a joint venture, according to the Indian mill’s Chairman Anil Kumar Chaudhary. That follows delays in discussions with Arcelor, whose plans to enter the growing India steel market by buying the bankrupt Essar Steel India Ltd along with partner Nippon have been held up by court battles.

“When we talk to them they are open but then they are too busy in the process of acquiring Essar,” Chaudhary told reporters in New Delhi, adding that he is still waiting for a reply to a letter written to Arcelor in February. The pact with Arcelor is still valid and a partnership with others won’t affect this venture, he said.
SAIL had approved a plan to build an automotive steel plant in India with Arcelor in 2017, but the proposed venture has been plagued by delays as both mills finetune terms of the deal.
The ministry is keen to stitch together ventures with foreign mills to make automotive steel as India is a big importer of high grade steel. Higher output of these products will also aid several Japanese and South Korean automobile companies that manufacture in India.