Jun 11

ArcelorMittal, Nippon tie up to jointly bid for Essar Steel

MUMBAI: Two global steel giants — ArcelorMittal and Nippon Steel — are teaming up to jointly bid
for bankrupt Essar Steel BSE 0.41 %, said two senior executives who did not want to be named. The
asset is expected to go under the hammer in the second week of February.

ArcelorMittal and Nippon Steel had originally planned to submit independent bids for Essar Steel,
which is among the five steel companies up for sale following RBI’s directions to refer 12 companies
to bankruptcy court in June last year. The other key contenders for Essar Steel are Tata Steel BSE 0.54
%, Vedanta Resources and the promoters of Essar, the Ruias, in partnership with Russia’s VTB

Japan’s Nippon Steel and billionaire Lakshmi Mittal-promoted ArcelorMittal decided to bid jointly for
Essar last week, said the people cited above. “The final contours of the tie-up are being worked out.
We don’t really know the rationale for the tie-up as yet,” said one of the persons.

ArcelorMittal declined comment on what it said was speculation. Nippon Steel couldn’t be reached
over the weekend and there was no response to an email.


“Nippon Steel has deep pockets but it does not have any presence in India and therefore partnering
with those who are familiar with Indian regulations is comforting,” said one of the persons. “For
Arcelor-Mittal, partnership will add to the financial muscle needed for acquiring the company.”

This partnership will intensify bidding for Essar Steel and result in lower haircuts for lenders. Essar
Steel faces Rs 54,851 crore in claims from financial creditors and Rs 22,914 crore in claims from
operational creditors. The five steel companies among the 12 are Electrosteel Steels, Bhushan Steel,
Monnet Ispat and Bhushan Power & Steel besides Essar Steel.

Of the five, the respective resolution professionals have accepted binding bids for Monnet Ispat and
Electrosteel Steels, while the other three will be up for sale after the February 1 Budget. JSW Ispat in
partnership with AION was the sole bidder for Monnet Ispat. Vedanta Resources emerged the
highest bidder for Electrosteel Steels.

Tata Steel has sought fresh bids for Electrosteel Steels after a clarification was issued on tax liability
for acquiring distressed companies a day after deadline. JSW Ispat has tied up with a Japanese fund
and Piramal to bid for Bhushan Steel and is expected to face stiff competition from Vedanta. “These
developments show that bidding for steel companies, particularly Essar, will attract intense
competition and no one wants to take a chance in losing good assets at a discount,” said one of those
aware of the development .

The Ruias will make every effort to retain their prized asset and their bid may be the most aggressive
among all bidders, said people with knowledge of discussions.

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