Battle for Essar Steel: ArcelorMittal to challenge VTB-Numetal’s bid
Billionaire Lakshmi Mittal’s ArcelorMittal will challenge in court the legitimacy of a bid for Essar Steel India Ltd. by a group led by Russia’s VTB Capital, intensifying the battle for the biggest industry asset yet to be sold under a new bankruptcy law.
Mittal’s steelmaker has several reasons to question the eligibility of the VTB-led Numetal Ltd. group, including that a company controlled by the family of the founder of Essar Steel was part of the consortium at the time of an initial round of bidding, Brian Aranha, an executive president at ArcelorMittal, said in an interview in Mumbai on Tuesday. Under India’s bankruptcy laws, owners of insolvent firms aren’t eligible to bid for assets. The case will be heard in the company court in Ahmedabad.
Numetal’s bids remain eligible and the company has approached the court to reinforce its suitability, while at the same time questioning the bid by Mittal’s company, a Numetal spokesman said in a text message late Tuesday. He didn’t elaborate on the reasons for eligibility but said VTB Capital UK is not affected by sanctions by U.S. and the European Union on Russia.
Aurora Enterprises -- a part of the Numetal-led consortium that’s backed by the son of one of Essar’s founders -- has since been bought out of the bidding group by India’s No. 1 producer of the alloy JSW Steel Ltd., according to people familiar with the matter.
Steelmakers are seeking to expand in India, set to be the second-largest producer this year, as economic growth drives demand and producers scale up capacity. ArcelorMittal, based in Luxembourg, and Japan’s Nippon Steel & Sumitomo Metal Corp. bid for the 10 million metric ton-a-year Essar plant in the latest round on Monday. Billionaire Anil Agarwal’s Vedanta Ltd. also made an offer, said people familiar with the matter.
“It’s more straightforward to acquire an underperforming asset and to work to improve its performance than to build something new, which would also take a long time before it would be operating,” Aranha said. “Land acquisition in India is very difficult.”
The plan to acquire Essar Steel remains ArcelorMittal’s “Plan A and Plan B” for India, Aranha said, where Mittal has long-term plans to raise Essar’s capacity to 15 million to 20 million tons.
Advisers to the resolution professional had recommended ArcelorMittal be considered ineligible because it held a stake in Uttam Galva Steels Ltd., which is classified as a delinquent borrower, when it made its offer for Essar Steel, people with knowledge said February. ArcelorMittal had sold the shares prior to the bid and was a “passive shareholder” with no management role, Aranha said.
“We are very confident our bid is valid although it’s clear one of the other consortia has a strategy of trying to convince people otherwise,” Aranha said. “Perhaps this is because they know that they can’t compete with us when it comes to industrial track record.”