ArcelorMittal to launch open offer on Monday

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JOINING FORCES: Ankit Miglani, Director, Commercial, Uttam Galva Steel, addressing a press conference in Mumbai on Saturday.
JOINING FORCES: Ankit Miglani, Director, Commercial, Uttam Galva Steel, addressing a press conference in Mumbai on Saturday.

Special Correspondent

Will have three directors on Uttam Glava board

Prices the offer at Rs. 120 per share

UGSL signs MoU with Orissa Govt

MUMBAI: Uttam Galva Steels Ltd. (UGSL), a leading manufacturer of cold rolled steel (CR) and galvanized steel has announced that ArcelorMittal Netherlands BV will join the company as a co-promoter.

The promoters of UGSL, R. K. Miglani and associates, signed an agreement to sell 5.6 per cent of their stake to ArcelorMittal. Both parties signed a co-promotion agreement on September 4 which gives them joint control rights.

ArcelorMittal Netherlands BV will launch a tender offer on September 7 for the acquisition of 29.39 per cent shares in UGSL. The price offered in the tender offer is Rs. 120 per share, which represents a 27 per cent premium over the two weeks volume weighted average and of 85 per cent over the six-month volume weighted average. The transaction value for 35 per cent stake is Rs. 500 crore implying an estimated enterprise value of Rs. 2,800 crore. The promoters have a 46 per cent stake in UGSL.

Subject to 29.39 per cent of shares being tendered in the offer, ArcelorMittal will hold 35 per cent of the equity in UGSL.

Addressing the media, Ankit Miglani, Managing Director, UGSL, said, “If fully subscribed, UGSL will hold 40 per cent and ArcelorMittal 35 per cent stake but if the offer is not fully subscribed, we will divest stake so that both UGSL and ArcelorMittal will hold 22.5 per cent each”.

There will be equal representation on the UGSL board of directors with three each from USGL and ArcelorMittal and six independent directors. There will be no change in the senior-most management positions, said Mr. Miglani.

“There is a lot of value addition in the deal and will help Uttam Galva grow. It will give us raw material security and access of high value added hot rolled products which are difficult to source in the domestic market. It will also help us enter new segments and have access to new markets”.

UGSL already sources about 50 per cent of its raw material from ArcelorMittal. “We, however, will retain the option of buying from other sources and there is no binding agreement”.

UGSL’s main operating facility in Khopoli near Mumbai has 1,400 employees. In 2008-09, it shipped 6.30 lakh tonnes of products and its service centres processed 3.80 lakh tonnes. It reported a turnover of Rs. 4,400 crore and a net profit of Rs. 100 crore. The company is targeting production of 8 lakh tonnes of steel this year and one million tonnes in 12-18 months. “Operating profit margins will go up from 12 per cent to 15 per cent in few years,” said Mr. Miglani.

UGSL signed a memorandum of understanding with the Orissa Government to set up a three million tonnes integrated steel plant although the project is still at the land acquisition stage. The company has been allotted 200 million tonnes of coal stocks but has not yet tied up for iron ore mines.



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