Essar Steel has bought out Stemcor of the UK from two companies -- Hy-Grade Pellets and Steel Corporation of Gujarat -- for $ 450 million (around Rs 1,950 crore).
The acquisition will make Essar Steel a fully integrated steel producer with end-to-end control over raw materials, processes, technology and finished products.
Following this, Essar Steel will also be one of the largest producers of cold-rolled products in the domestic market, with a 1.2 million tonne capacity.
HGPL and SCGL will now be fully owned by Essar Steel. In HGPL, Stemcor held 51 per cent equity while the rest was held by Essar Steel. SCGL was a wholly owned Stemcor subsidiary.
In 2000, Essar Steel had hived off its pellet business as a joint venture with Stemcor of the UK to form HGPL.
Essar Steel was paid Rs 520 crore (Rs 5.2 billion) in cash and Rs 113 crore (Rs 1.13 billion) debt was transferred from its books to HGPL's books.
HGPL operates a 4 million tonne pellet plant at Visakhapatnam. SGCL's acquisition will bring in 1.2 million tonnes of cold rolling capacity into Essar Steel and will result in considerable value addition across the chain and a more diversified product range.
An Essar Steel release, quoting managing director Prashant Ruia, said: "We expect these acquisitions to bring in increased synergy and seamless integration in our operations and help strengthen the company. We look forward to consolidating our position in the market, especially in the value-added segment."
The acquisition would be funded through equity by way of issuance of compulsorily convertible preference shares as approved by shareholders and regulatory authorities, the release added.
In 2004, Essar Steel had taken an approval in principle from its board to acquire Stemcor's holding in SCGL and HGPL.
