The Hindu : Business : JSW Steel buys 3 cos. in U.S.

Online edition of India's National Newspaper
Wednesday, Aug 22, 2007
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Business

JSW Steel buys 3 cos. in U.S.

Staff Correspondent

The deal is valued at $900 m

Target cos. to be merged into single operating entity
Vijayanagar plant to scale up capacity
to 10 m tonnes

MUMBAI: JSW Steel has acquired three companies in Texas, U.S. The target companies are: Jindal United Steel Corporation, Saw Pipes USA, and Jindal Enterprises LLC. The three companies have 1.2 million net tonnes of plate mill, 5.5 lakh net tonnes of pipe mill and 3.5 lakh net tonnes of double jointing and coating lines, respectively.

The board of directors of JSW Steel has approved the acquisition of these facilities at an acquisition price of $900 million. As per the arrangement, JSW Steel will acquire 90 per cent stake at approved enterprise valuation ($810 million) and the balance will be retained by some of the existing shareholders.

With this acquisition, JSW would get an entry into North America’s growing and booming oil and gas sector, which is driving up the plate and pipe demand. The company also gets an opportunity to capture value addition from slabs to high-end products, namely, pipes.

Addressing the media here on Tuesday, Sajjan Jindal, Vice Chairman and Managing Director, JSW Steel, said, “Our Vijayangar plant makes 3.8 million tonnes of slabs, of which 2.8 million goes for hot rolled coil production and the remaining is sold in the open market. This will now go to the U.S. facility to make high-end plates and pipes for the energy market. The products enjoy a healthy demand in the U.S. and fits in with our strategy.” The company is expanding its Vijayanagar facility from 3.8 million tonnes to 10 million tonnes by September 2010.

JSW Steel will form wholly owned subsidiaries/step down subsidiaries in the Netherlands and the U.S. to raise finances and make investments to acquire the 90 per cent stake. All the target companies will be merged into one single operating entity in the U.S. through a scheme of merger.

According to Seshagiri Rao, Director (Finance), JSW Steel, “we should be able to close the deal in the next 45 days subject to approvals in the U.S.”

The board of JSW Steel has also approved the setting up of six modules of 500 tonnes per hour beneficiation plant (feed capacity of 20 million tonnes annually), producing 15 million tonnes of beneficiated ore at an estimated cost of Rs. 850 crore.

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