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Jindal Steel second time unlucky for Rocklands

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Buys only another 12.56% despite extended deadlines, revised offer.

Ltd (JSPL) has once again failed to acquire Australian coking coal miner Rocklands Richfield, despite a revised offer price and extended deadlines. It managed to buy 12.56 per cent stake, raising its holdings to 27.29 per cent.

JSPL finance director, Sushil Maroo, said, “Our aim was to get over 50 per cent stake in the company, and clearly that hasn’t happened.”

Maroo was non-committal about JSPL’s Rocklands acquisition plans. “It’s not necessary that every effort gets translated into an acquisition. We are not keen on paying more to acquire the company at this stage and hence, are not pursuing it any further.”

“This is it,” he said.

JSPL this time chose the open offer route to acquire the Australian firm. The open offer at $0.25 per share commenced on May 5 and was supposed to end on June 6. But JSPL revised the offer price to $0.30 per share and extended the deadline to June 20 on May 26, since the share price of Rocklands was much higher than the original offer price during the period. It again extended the deadline to July 5. At $0.25 per share, the cost of acquisition was pegged at $88 million.

In 2009 when JSPL tried to acquire Rocklands for the first time, it was locked in a three-way battle with of India and Meijin Steel of China. Jindal was then ready to pay $0.56 per share. Essar bowed out early and Jindal managed to nudge the Chinese company, but the talks with Rocklands fell abruptly and no explanation was given.

Other acquisitions between 2007 & 2010
In 2007, JSPL signed a $2.1-billion deal with the Bolivian government to mine one of the world’s largest iron ore mines, with estimated reserves of 40 billion tonnes. It will mine half of it.

As early as March 30 this year, Jindal Steel Bolivia, an arm of JSPL, announced it would build a 2.52-million tonne per annum natural gas-based direct reduction plant at EL-Mutun, Puerto Suarez, Bolivia. The plant would be first of the three units of its proposed sponge iron plant in the country.

JSPL also bought Oman’s Shadeed Iron and Steel Company in 2010 for $464 million. It has firmed up plans for investing $1 billion in the company. Though Jindal Steel has managed such big-ticket deals, Rocklands, a company under $100 million, has snubbed it twice.

Why Rocklands?
But, what was there in Rocklands that charmed Jindal Steel? At the time of announcing the open offer, JSPL had said Rocklands would be a strategic fit to its coal exploration activities in Australia and a potential important feedstock for its international steel making plans.

The coal deposits of Rocklands, according to JSPL, are perfect fit for the company’s steel operations. Indian steel companies have been scouting for coal reserves across geographies, especially Australia, as the quality of the deposits down under are of superior quality.

Rocklands has high grade coking coal deposits in the Bowen Basin of Queensland. It also has a 480,000-tonne per annum coking coal plant in eastern China. With a few more licences to explore coking coal deposits in Australia, the future of Rocklands is bright.

Maroo, however, is not losing hope. He maintained the interest in Rocklands depended on many factors and the situation might change going forward. “Maybe we will acquire something else or may tie up with some other company for coking coal. It that happens, our interest in Rocklands will go down,” he said. “Interest in any asset is linked to the need at that point in time. So, if the need is satisfied from any other source, the interest will go down.”

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