ArcelorMittal submits bid for India’s Essar Steel
ArcelorMittal, the world’s largest steel producer by sales, has submitted a bid for India’s Essar Steel, as India’s new bankruptcy regime throws the national metals industry into a major wave of consolidation.
Part of the debt-laden Essar conglomerate, Essar Steel was put up for sale after being forced into insolvency proceedings last July by the central bank, along with 11 other large companies. Essar Steel is one of the country’s largest steel producers, with a production capacity of about 10m tonnes per annum.
Lakshmi Mittal, chairman of ArcelorMittal, said that the proposed acquisition “provides a compelling opportunity for ArcelorMittal to enter the high growth Indian steel market”, adding that his company’s industry expertise made it “uniquely equipped to implement a successful turnround which would be beneficial to Essar’s stakeholders”.
Today was the deadline for bids to be submitted for Essar Steel. ArcelorMittal faces a rival bid from a consortium headed by Russia’s VTB Bank, in partnership with Essar’s controlling Ruia family, according to a person with direct knowledge of the bid. Local media reports have also claimed that Tata Steel has been preparing a bid, but the company declined to comment.
Essar Steel was pushed into financial stress after investing heavily in an expansion of its main plant at Hazira in India’s western Gujarat state, only to be hit by falling prices and gas supply problems.
The outcome of this and other big ongoing insolvency processes is seen as a crucial test of the country’s new bankruptcy regime, which came into force in 2016, and is aimed at ending an era of perceived impunity for controlling shareholders who had previously kept control of their businesses even as lenders took writedowns.