Signage for Essar Steel Ltd. is displayed as workers load items onto a truck at the company’s Pune Facility near Pune. (Photographer: Dhiraj Singh/Bloomberg)

India Court Scraps Ruias Offer for Essar Paving Way for Arcelor

(Bloomberg) -- A bankruptcy court rejected a last-minute offer by the founders of Essar Steel India Ltd. to wrest back control of the indebted steelmaker, easing the path for a potential takeover by ArcelorMittal.

  • The Ahmedabad bench of the National Company Law Tribunal rejected the application made by the founders of Essar Steel for considering their settlement plan and withdrawing the bankruptcy process, Ruby Ahuja, a lawyer representing ArcelorMittal in the court, said by phone. In October, the Ruia brothers who founded the distressed mill offered to pay about 544 billion rupees ($7.6 billion) to creditors to thwart a potential takeover by ArcelorMittal, which had received the approval of lenders to buy the company.

Key Insights

  • Bidding for the mill has been one of the most hotly contested under India’s insolvency resolution process, drawing offers from billionaire Anil Agarwal’s Vedanta Ltd. and a VTB Capital-led consortium.
  • The Ruias’ offer, which trumped Arcelor and partner Nippon Steel & Sumitomo Metal Corp.’s final offer of an upfront payment of 420 billion rupees to the banks, would have meant a full recovery for senior secured financial lenders.
  • Essar Steel is Arcelor’s chance to enter the Indian market after previous attempts to set up mills in the country failed to materialize. The 10 million tons a year steel facility will give the Luxembourg-based company a sizable presence in an industry that is expected to benefit from Prime Minister Narendra Modi’s plan to invest trillions of rupees in infrastructure upgrades.

What’s Next?

  • The company tribunal will now take the sale forward by deliberating on the offer made by ArcelorMittal on Wednesday, according to Ahuja.
  • However, the process may see a further roadblock if the Ruias appeal to a higher court and get a stay on the sale. Essar Group said it continues to believe its offer was the most compelling and will take a call on next steps after going through the verdict.
  • ArcelorMittal said the rejection of the Ruias’ bid may lead to “swift resolution to this case.”

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