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Essar Group to invest Rs 2,000 cr in Algoma

Kausik Datta  |  Mumbai 

To of recently to 4 mn tonne a year.
plans to invest $500 million (Rs 2,000 crore) to scale up the annual production capacity of its recently acquired to 4 million tonne in three years from the existing 2.5 million tonne.
Sources said the group had decided to scale up the production capacity after receiving the approval of Algoma's shareholders.
More than 82 per cent of the shareholders had voted in favour of the acquisition. Essar expects to conclude other formalities, including the final court approval, by next week.
An spokesperson declined to comment.
Essar Global acquired Algoma in an all-cash deal worth $1.6 billion (nearly Rs 6,400 crore) in April through its wholly owned subsidiary, Essar Steel Holdings. Algoma supplies sheets to US car markers including General Motors Corp and Ford Motor. UBS was the adviser to Essar Global.
Essar Global had offered C$56 a share for the Canadian company, a 48 per cent premium over the 20-day average price ended February 14.

Essar Global offered seven time Algoma's earnings before interest, taxes, depreciation and amortization, or EDITDA.

Tata Steel paid nine times the earnings of Corus Group, analysts said.
Sources said Algoma's idle No 6 blast furnace would be put back on track and the galvanised steel capacity will be augmented. Algoma would also upgrade its infrastructure to handle the increased capacity.
Algoma is an integrated steel producer based in Ontario, with revenues of C$1.9 billion (nearly Rs 7100 crore). Essar Steel has an integrated steel capacity of 4.6 million tonne per annum, which will be enhanced to 8.5 million tonne by next year.
With the acquisition, Essar will now enjoy access to the US carmakers. Algoma shipped about 2.42 million tonnes last year, with about 80 per cent coming from hot-rolled sheet.
In addition, Essar can also access raw materials by virtue of Algoma's 15-year coal-supply agreement and a seven-year contract for iron ore.

First Published: Thu, June 14 2007. 00:00 IST