Nippon Steel raises stakes in bidding war for India’s Essar
After hitting a snag earlier this year, Nippon Steel & Sumitomo Metal’s bid to acquire Indian steelmaker Essar Steel India is gathering steam again, raising hopes — and some fears — over the Japanese steel producer’s future.
Steelmakers around the world are competing for a slice of the fast-growing Indian market. Nippon Steel has also made its bid for Essar, India’s fourth-biggest steelmaker, central to its midterm business plan.
Nippon Steel’s current plan runs from fiscal 2018, which started in April, to fiscal 2020. Many market participants view its strategy in the South Asian country favorably. But even if Nippon Steel’s purchase of Essar goes through, the price is likely to be higher than it anticipated. This has raised concerns among some market players the Japaneses steelmaker may overpay.
Nippon Steel teamed up with Luxembourg-based ArcelorMittal, the world’s biggest steelmaker, to take part in the bidding that began in February to select investors to bail out financially troubled Essar.
The Nippon Steel-ArcelorMittal alliance is believed to have submitted an initial bid of about 300 billion rupees ($4.15 billion). The takeover attempt stalled after Essar’s creditors committee decided that ArcelorMittal was ineligible to bid. But on Sept. 7, India’s National Company Law Appellate Tribunal conditionally declared Nippon Steel and ArcelorMittal eligible, removing a major obstacle to the purchase.
Essar is an attractive prize for steelmakers that have set their sights on the Indian market.