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| Slump effect: US company won't buy Gujarat firm |
| BS Reporter / Mumbai Feb 24, 2009, 00:53 IST |
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The US-based Geneva Acquisition Corporation (GAC) has terminated its plan to acquire Global High-Tech Industries (GHIL), the Gujarat-based sponge iron and billets producer, following adverse market conditions. GAC, engaged in inorganic investments, recently announced it would not seek its shareholders' approval for the merger of Global.
In November 2008, GAC had entered into a definitive agreement to purchase GHIL. Under the terms of the agreement, GAC would purchase the sponge iron producer to form India Steel & Metals Corporation in a multi-step transaction, initially acquiring 51.6 per cent of GHIL with an option to acquire an additional 15.7 per cent. The agreement also allows GAC a complete takeover in the later stage by acquiring the remaining 32.7 per cent.
GAC President James McGrath said in a statement that the company was disappointed as the current market conditions overshadowed the deal. “We could not attract necessary support from investors to execute GHIL’s growth plans and merge with GAC,” he said.
GAC also said that its special shareholder meeting scheduled on February 11 has been cancelled after its decision to terminate the deal. As per the earlier plan, the transaction was supposed to conclude by mid-February. A GHIL official declined to comment on the development, saying the final decision was pending.
Through the merger, GHIL was eyeing a three-fold growth in production. Currently, GHIL’s facility at Bhuj in Gujarat has an operating capacity of 1.05 lakh tonnes of sponge iron, one lakh tonnes of billets and 96,000 tonnes of rolled structural products. The company is also in the process of acquiring iron ore mines in Madhya Pradesh.
“Since the deal is terminated, the company is expected to look at other buyers for strategic growth. The current financial situation is not supportive for selling stake, since the prices of commodities are dropping,” said industry analysts.
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