Tata Steel Gets Tribunal Nod for Biggest Acquisition Since Corus
NCLT gives Tata Steel approval for purchase of Bhushan Steel’s assets.
(Bloomberg) -- Tata Steel Ltd.’s plan to double its production capacity in five years received a boost after an Indian court gave its final approval for the purchase of the assets of Bhushan Steel Ltd., Tata’s biggest buy since Corus Group Plc.
The two-judge tribunal rejected objections to Tata’s bid from Bhushan creditor Larsen & Toubro Ltd. and the steel company’s employees, paving the way for the sale. Bhushan Steel owes its lenders about 560 billion rupees ($8.3 billion) and is among the most indebted of the defaulters identified by the Reserve Bank of India last year under its new bankruptcy law.
Mumbai-based Tata had offered 352 billion rupees in cash to acquire Bhushan Steel, which has capacity of 5.6 million metric tons a year. Tata’s capacity in India is 13 million tons, making it the nation’s No. 3 producer, and it has also announced the expansion of a further 5 million tons at its Kalinganagar plant over four years.
According to a lawyer for the administrator in charge of the insolvency process, Tata Steel will also pay another 12 billion rupees to creditors and convert the remaining debt owed to banks to equity. That would give Tata a 75 percent stake in Bhushan, while banks would get just over 12 percent and the public’s share would drop to 10 percent. The founding Singal family will be left with 2.5 percent. The Competition Commission of India had already given its approval for the acquisition.
The tribunal’s ruling comes even as bitter court battles between founders, lenders and bidders delay a timely resolution of the sale process for other distressed assets. Earlier, Vedanta Ltd. got the nod from the tribunal for the acquisition of Electrosteel Steels Ltd., only to see an appeal by a rival bidder put the matter back in the hands of the court.
A successful resolution of about $210 billion in stressed loans is crucial to Prime Minister Narendra Modi’s efforts to clean-up the balance sheets of state-run banks, which hold nearly 90 percent of the impaired assets.
The Bhushan buy is Tata’s biggest after its 2007 acquisition of Corus for $12 billion, one of India’s most expensive overseas purchases. The European company’s fortunes soon turned, however, as demand slumped following the 2008 economic crisis and China flooded the market with additional steel, forcing Tata to sell some of the business and take billions of dollars in writedowns.
Shares of Tata Steel surged 4.3 percent in Mumbai after the court approval to their highest since early March.
Tata has also bid for the assets of another Singal company, Bhushan Power & Steel Ltd., which has attracted interest from Liberty House Group. An appeals court will hear Tata’s plea on May 24 protesting the tribunal’s decision to allow Liberty to bid for firm, which has capacity of 2.3 million tons a year, after the lapse of a deadline for submitting an offer.
--With assistance from George Smith Alexander
To contact the reporters on this story: Upmanyu Trivedi in New Delhi at utrivedi2@bloomberg.net, Swansy Afonso in Mumbai at safonso2@bloomberg.net.
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Jake Lloyd-Smith
©2018 Bloomberg L.P.