Essar Steel: Numetal, ArcelorMittal may be headed for legal battle
NEWDELHI:Early signals emanating from ArcelorMittal and Numetal, the only companies to have placed binding bids to acquire Essar Steel, hint at a protracted legal battle that could mire the resolution of the steelmaker’s debts.
Although the lenders of Essar Steel have not decided whether they are eligible to bid for the company’s assets, both ArcelorMittal and Numetal have indicated that they will pursue legal options if their bids are scrapped. In the weeks following the submission of binding bids on February 9, ArcelorMittal and Numetal have aggressively postured in public, calling each other’s bids ineligible and threatening legal action if decided otherwise.
According to two people directly involved in Essar Steel’s resolution process, this was one of the reasons why some companies did not participate in the final round of bidding, despite showing interest initially.
“We felt that the resolution process could run into litigation and therefore we decided to stay out of bidding and focus our energies on other assets which are up for bidding,” said a partner of a large global special situation fund on condition of anonymity. Among those who had shown interest in bidding for Essar Steel but did not submit binding bids are Tata Steel Ltd and Vedanta group, Mint reported on February 12.
While the acquisition of Essar Steel is key to ArcelorMittal’s long-cherished India entry plans, for the Ruia family, which owns 25% in the Numetal consortium, it is the last shot at retaining Essar Steel at a time when the demand cycle of steel is turning around globally; prices have almost doubled in the past two years. Essar Steel owes close to ₹45,000 crore to various lenders, comprising the single largest chunk of group-level debt.
“The spirit of the law is to prevent defaulters from buying back their own companies,” Aditya Mittal, group chief financial officer and son of business tycoon L N Mittal, said in an interview last week.