The Hindu Business Line : JSW Steel buys group of 3 US cos

The three companies are: Jindal United Steel Corporation, Saw Pipes of the US, and Jindal Enterprises LLC. These companies have 1.2 million tonnes of plate mill, 0.55 mt of pipe mill and 0.35 mt of double jointing and coating lines.

Mr Seshagiri Rao, Director, Finance, said funding required for completing the acquisition of 90 per cent stake, including working capital, will be $940 million ($810 million for a 90 per cent stake and the rest towards take over of inventory).

Funding

The deal will be financed by a foreign currency debt of $380 million (recourse debt) to be raised against the guarantee of JSW Steel and the balance $560 million to be raised in the target company. The company has further flexibility of shifting part of the recourse debt to the extent of $230 million to the target company.

JSW, which carries a debt of Rs 4,000 crore, will form wholly-owned subsidiaries/step down subsidiaries in the Netherlands and the US to raise finances and make investments to acquire the 90 per cent stake. All the target companies will be merged into a single operating entity later, Mr Rao said.

Mr Sajjan Jindal, Vice-Chairman and Managing Director, said the acquisition would get an entry point into growing and booming oil and gas sector in North America, which was driving up the plate and pipe demand. The company also gets an opportunity to capture value addition from slabs (produced at JSW Vijayanagar plant here) to high-end product namely pipes.

Orbit property

Mr Rao said the company has entered into an agreement with Orbit Corporation to buy office premises at Lower Parel in Mumbai jointly with its group companies in which JSW Steel share, including all cost, was Rs 336 crore. “It is now decided to acquire larger office premises jointly with group companies at Kalina near Bandra-Kurla complex to be developed by Orbit Shelter Corporation Ltd, in lieu of the office premises at Lower Parel. This expenditure had been included in the overall capex of Rs 17,100 crore.”

The JSW Board had also approved setting up of six modules of 500 tph beneficiation plant (feed capacity of 20 mtpa) producing 15 mtpa of beneficiated ore at an estimated cost of Rs 850 crore. Phase I (7.5 mtpa) will be completed within 12 months coinciding with commissioning of capacity expansion project of 6.8 mtpa and phase II by September 2010 along with the commissioning of expansion project to 10 mtpa. The project cost would be financed by way of a term loan of Rs 500 crore and balance from cash accruals.

JSW had sold accrued CER (certified emission reduction) of 1,337,555 at €14.90 per CER and received Rs 111.10 crore, he added.