High environmental and pension liabilities may force JSW Steel, India’s third-largest steel-maker, to drop its plan to bid for Europe’s Ilva Steel, which was widely seen as an ambitious overseas expansion move by the Mumbai-based group as it scouts for steel-making and mining assets outside India.
This would leave the field open for ArcelorMittal to snap up the 8.5-million-tonne-a-year Ilva, valued at around $600 million according to investment bankers.
The troubled Ilva Steel, which is under special administration, has environmental liabilities of about €11.5 billion (Rs. 89,700 crore), according to people with knowledge of the matter. This is in addition to €4.5 billion (Rs. 35,100 crore) in pension liabilities, people familiar with JSW’s recent due-diligence exercise told HT.
Ilva, based in Taranto, Italy, is Europe’s largest steel plant by output and employs about 16,000 people. It has over €1 billion in cash, which is being used to run the company.
Sajjan Jindal-led JSW and a joint venture between ArcelorMittal and Marcegaglia are the two firms that showed interest in Ilva, which makes products for the auto sector.
The JSW group is currently close to acquiring another Italian steel company, Lucchini, and is also in advanced stages to finalise a deal to buy embattled iron ore miner London Mining.
These two deals are together likely to be valued at less than $300 million, with JSW Group only interested in acquiring the finishing mill of Lucchini, which has also been facing operational problems.
JSW Steel plans to send billets — intermediate steel products — from India and use the finishing mill capacity of Lucchini to make products for the European market.
When contacted, Seshagiri Rao, joint MD and Group CFO, said: “Italy is a high-cost economy and growth has also slowed quite a bit. While the group is open to acquiring mines for backward integration and will also look at steel units, we are very careful while evaluating our options.”