Tatas to acquire Usha Martin's steel business for up to Rs 47 billion

Transaction value is in the range of Rs 43-47 billion

Tata Steel has executed a definitive agreement for acquisition of Usha Martin's steel business through a slump sale on a going concern basis.

The amount of consideration for the transfer of business will be in the range of Rs 43 billion to Rs 47 billion, subject to adjustments, as per the signed agreements, the companies said on Saturday.

Apart from Tata Steel, four companies — JSW Steel, Kalyani, Vedanta and Liberty House — had evinced interest in Usha Martin's steel business. 

Tata Steel entered the agreement for sale on Saturday and the process is expected to be completed in the next six to nine months.

Tata Steel said the closure of the acquisition was subject to fulfilment of various conditions under the agreements. At the closing, Tata Steel or any of its subsidiaries or affiliates may carry out the acquisition, the company statement to the stock exchanges said.

"The parties shall jointly work towards fulfilment of conditions precedent which are largely regulatory approvals required for the transfer of the business undertaking. All the employees pertaining to the steel business will transfer as part of the acquisition," the company said.

The steel business of Usha Martin comprised a specialised one million tonne alloy-based manufacturing capacity in the long products segment based in Jamshedpur, a producing iron ore mine, a coal mine under development and captive power plants.

The acquisition is part of the overall strategy to build capability in long products and expand product offerings including high value-added products, Tata Steel said.

For Usha Martin, the deal would help deleverage its balance sheet. Usha Martin's debt was around Rs 45 billion.

The amount of gross revenue of the steel business and percentage in relation to the company on a standalone basis for the year ended March 31, 2018, was Rs 34.41 billion (approximately 70 per cent). In June, Arpwood Capital and SBI Capital Markets were appointed to find buyers. Around the same time, the board set up an independent committee to evaluate any proposals and oversee the process of sale. 

The committee of independent directors of Usha Martin unanimously recommended to the board the sale to Tata Steel, Usha Martin said.

Usha Martin was earlier looking to sell its wire and wire ropes business. However, a change in market conditions prompted the company to look at sale of the steel business. After divestment of the steel business and repayment of lenders, Usha Martin will be able to operate a significantly deleveraged wire ropes business, in which it is one of the leading global players, Usha Martin's statement to the stock exchanges said.