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ArcelorMittal Submits Revised Offer for Essar Steel Buyout

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ArcelorMittal MT has submitted a revised proposal for the acquisition of Essar Steel India Limited to the latter’s Committee of Creditors. The offer also includes a commitment to pay the total amount due to the financial creditors of KSS Petron and Uttam Galva. As such, it represents unprecedented value to all concerned creditors.

According to a report by Reuters, ArcelorMittal raised the bid to 420 billion rupees (or roughly $5.8 billion) from its earlier reported offer of 305 billion rupees.  

ArcelorMittal believes that Essar Steel provides it with an opportunity to enter the high-growth Indian steel market. Moreover, if the move is successful, Essar Steel will add significant strategic value to the group’s business, as stated by the company.  

The company’s shares tumbled 1.8% and closed the day at $28.38, following the announcement. Notably, shares of ArcelorMittal have moved up 4.2% in the past year compared with the industry’s 2.8% rise.

Background of the Deal

Earlier this year, ArcelorMittal India Private Ltd. (“AMIPL”) and Nippon Steel & Sumitomo Metal Corp. (“NSSMC”) announced that they have inked a joint venture (JV) deal, under which the companies will co-manage and co-own Essar Steel, provided AMIPL’s bid is successful.

On Feb 12, AMIPL submitted a resolution plan that outlined the company’s intention to formally have NSSMC join the bid to acquire Essar Steel. In case India’s National Company Law Tribunal formally selects and accepts this plan, the companies will jointly acquire and manage Essar Steel.

Notably, ArcelorMittal also provided a detailed industrial and turnaround strategy in its resolution plan, which is aimed at restoring Essar Steel's fortunes. This will enable the company to realize its full potential and cater to expected growth of steel demand in India.

According to ArcelorMittal, the companies can incorporate their technology and knowledge to support a swift turn-around in Essar Steel’s performance. This will enable it to increase production and improve product capabilities, but also contribute to the improvement of India's manufacturing sector and economy development.

ArcelorMittal Price and Consensus

ArcelorMittal Price and Consensus | ArcelorMittal Quote

Zacks Rank & Other Stocks to Consider

ArcelorMittal currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the basic materials space are Ingevity Corp. NGVT, Celanese Corp. CE and Huntsman Corp. HUN, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has an expected long-term earnings growth rate of 12%. Its shares have moved up 65% in the past year.

Celanese has an expected long-term earnings growth rate of 10%. Its shares have gained 15.7% in the past year.

Huntsman has an expected long-term earnings growth rate of 8.5%. Its shares have returned 4% in a year.

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