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ArcelorMittal to acquire stake in Indian Re-Roller: Uttam Galva may issue new shares as price jumped

ArcelorMittal on Friday said that it plans to launch a tender offer today for the acquisition of 29.4% shares in Uttam Galva Steels Limited , an Indian producer of cold rolled steel, galvanized products and colour coated coils & sheets.

For the year ended 31 Match 2009 Uttam Galva had a turnover of USD890m and net profit after tax of USD21m.

The tender offer is priced at INR120 per share, which reportedly represents a 27% premium over the two weeks volume weighted average and of 85% over the six month volume weighted average.

The transaction value for 35% stake is USD103m, representing an estimated enterprise value of USD560m.

The completion of the transaction is subject to customary approvals.

Uttam Galva Steels Ltd. founders will sell shares to ArcelorMittal if an offer by the world’s largest steelmaker to raise its stake in the Indian producer fails after the stock price jumped 21 percent in two days.

Uttam Galva’s shares advanced to 125.35 rupees today, the highest in more than 18 years. The Luxembourg-based steelmaker Sept. 3 offered 120 rupees apiece for an additional 29.4 percent of Uttam after agreeing to buy 5.6 percent the same day.

The spurt in the shares may make the offer unattractive to individual shareholders, Uttam Galva Director Ankit Miglani said. The Miglani family will sell more shares to ArcelorMittal should the offer be unsuccessful, he said in a phone interview today.

ArcelorMittal’s first acquisition in the South Asian nation may help India-born Chief Executive Officer Lakshmi Mittal gain from demand that’s forecast by the government to grow as much as 10 percent in the year ending March 31. India this year overtook China in car exports and is challenging Thailand and South Korea as an alternative production center in Asia.

“This would bring us closer to the expanding white goods and automotive consumers in India,” Sudhir Maheshwari, member of ArcelorMittal board said in an e-mailed reply. Uttam Galva will gain access to technology and high-quality raw materials used to make products used in cars and consumer goods, he said.


The venture is ArcelorMittal’s first in India because the company hasn’t commenced work on the $20 billion plan to build two factories in the eastern states of Orissa and Jharkhand. The ventures have been delayed because of the global recession and delays in securing mining permits, Vijay Kumar Bhatnagar, chief executive officer of the India unit, said April 15.

“Our greenfield pursuits will continue independent of this partnership,” Maheshwari said today. He didn’t provide details.

ArcelorMittal plans to supply Uttam Galva from the plants proposed in Orissa and Jharkhand, Maheshwari said. At present, it supplies hot-rolled steel to Uttam Galva plant in the western state of Maharashtra from its mills overseas.

ArcelorMittal and the Miglani family will hold an equal share in the company after the open offer, Miglani said. The family owns 45.6 percent of Uttam Galva, he said.

The open offer will begin on Oct. 31 and close on Nov. 19, ArcelorMittal said in a newspaper advertisement today.

Source: Bloomberg / Trading Markets

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