CCI nod sought: JSW arm, two others to buy pellet maker BRPL
Banikinkar Pattanayak | New Delhi |
Published: January 16, 2018 6:07 AM
With the domestic steel sector recovering from a global price crash,
the race to acquire input producers seems to be hotting up. The project
management arm of Sajjan Jindal-led JSW Group and two other companies
will acquire Brahmani River Pellets (BRPL) after Tata
Steel’s deal to buy the Odisha-based pellet maker collapsed in October
last year. JSW Techno Projects Management and Thriveni Pellets will pick
up 49% each in BRPL from the latter’s holding company Aryan Mining and
Trading Corporation (AMTC), while Mitsun Steels will buy 2%. These
companies have sought the approval of the Competition Commission of
India (CCI), stating the proposed deal won’t “cause any appreciable
adverse effect on competition in any relevant market in India”. While
the application doesn’t mention the deal value, sources told FE that JSW
Techno could cough up `500-600 crore for its 49% stake in BRPL.
Assuming that both Thriveni and Mitsun might have valued BRPL at the
same level, the total deal size could be roughly around `1,100 crore.
Tata Steel had in December 2016 announced to buy BRPL for `900 crore,
before terminating the agreement in October 2017. BRPL has capacity to
produce around four million tonne of pellet and has an iron ore
processing facility with similar capacity in Odisha.
While JSW Techno could use the acquisition to further its interest in
trading of mineral or pellets, a 49% stake in BRPL would substantially
enhance Thriveni’s stature as a pellet maker. The JSW arm is learnt to
be planning some investments in the mine, slurry pipeline and
beneficiary plant of BRPL as well. So, it has to shell out in excess of
`1,100 crore initially (for both the stake purchase and fresh
investments), said the sources. JSW Techno had been in talks with BRPL
even before Tata Steel got into the deal with the pellet maker, one of
the sources said. The talks gained momentum again when the agreement
between the Tatas and BRPL collapsed, leading to the clinching of the
latest deal. JSW Techno Projects, a part of JSW Group, is owned by the
Sajjan Jindal family trust. It is engaged in operation and
maintenance/project management consultancy services; strategic
investments; and manufacturing of industrial gases. It owns a 1000 tonne
per day (tpd) oxygen plant in Dolvi in Maharashtra; a 2200 tpd oxygen
plant is in the process of commissioning; and another 2200 tpd oxygen
plant is under construction.
In their application with the CCI, the companies have said in case
one or more acquirers don’t buy their portion of shares in BRPL, the
other contender/s will have the right to own up to 100% in the pellet
manufacturer. “Accordingly, it is possible that any one of the acquirers
can own up to 100% of the shares of BRPL (alternate transaction) on the
closing date,” they said. BRPL is a wholly owned subsidiary of AMTC
(minus six shares held by nominee shareholders). As much as 73% in AMTC
is held by the Moorgate Group through its wholly-owned subsidiaries —
Stemcor Iron Ore Holdings, Cyprus, and Moorgate Industries India. The
remaining 27% is held by the Saraf group. Late last year, informing the
BSE of the termination of its agreement with BRPL, Tata Steel had said:
“The transaction has not been completed within the long stop date, due
to non-fulfilment of certain conditions precedent by the sellers,
obtaining the necessary regulatory approvals from the Reserve Bank of
India, settlement of proceedings under FEMA by the Directorate of
Enforcement, approval from the Income Tax authorities, etc.”
India’s crude steel production rose nearly 6% to touch a record 101
million tonnes in 2017, according to official data. The pick-up suggests
a growing appetite. With the government favouring greater use of
domestic steel by various departments, local production may get a
further boost, which could encourage more such consolidation deals in
the coming years.
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