JSW consortium submits bid for Italian plant Ilva

Ray-Ban owner part of consortium

Sajjan Jindal’s JSW Steel, along with three consortium partners, including the owner of the Luxottica Group, has submitted a final bid for Italy’s loss-making 10-million-tonne steel plant, Ilva.

The JSW consortium will be pitted against the one led by ArcelorMittal and Italian steel-processing major Marcegaglia. 

The bid value is not known but is likely to be around $1 billion. The deadline, as of now, for submitting bids is March 4, which is when the Italian government is expected to take a decision.

According to the contours of the arrangement between the consortium partners, it is understood that JSW would hold around a 35 per cent stake in the combined entity. 

The balance will be held by financial investor CDP, businessman Leonardo Del Vecchio and Italian steelmaker Arvedi. 

The net worth of Del Vecchio, founder and chairman of the Luxottica Group, owner of brands such as Ray-Ban and Oakley, is pegged at $17.9 billion. 

The operational management of the plant would, however, be with JSW, said sources close to the development. An email sent to JSW went unanswered.

Ilva, which was rated one of the most polluting steel plants of Europe, was nationalised in 2015, temporarily, in the hope of finding a new owner. 

The plant, in Taranto in southern Italy, employs more than 14,000 people, and had been under special administration since 2013, when its owners were accused of failing to prevent toxic emissions. 
 

According to reports, some of the environmental hazards caused by Ilva, allegedly, included the deaths of 386 local residents between 1998 and 2010 owing to exposure to toxic emissions.

Industry observers said the new owners of Ilva would, therefore, not only have to invest in turning around the plant but will also have to implement the environmental standards and regulations prevalent in the European Union.

When the ArcelorMittal-Marcegaglia combine offered to buy the plant in June, it had said that it would install the best available technology to bring Ilva in line with European environmental standards and legislation.

After all, with all its problems, Ilva is a vital asset in the Italian steel chain. It is said that at full capacity the plant could produce as much as Bulgaria, Greece, Hungary, Croatia, Slovenia, Romania and Luxembourg would do together. There could be other contenders for the plant but the lead buyers for Ilva are the ArcelorMittal and JSW-CDP consortia. Within the JSW-CDP consortium, what may have worked in JSW’s favour to get the operational management of the plant, in case the bid swings the consortium’s way, is the experience of turning around Ispat. JSW Steel acquired Ispat Industries in 2010. 

By 2012, when JSW Ispat was merged with JSW Steel, JSW Ispat had been brought out of corporate debt restructuring through an enhanced ability to pay interest and was Ebitda (earnings before interest, tax, depreciation and amortisation)-positive. However, even if Ilva doesn’t work out, JSW has other targets. It is the sole bidder for a controlling stake in Monnet Ispat Energy, through the strategic debt restructuring route. Also, it has approached lenders to take over the debt of Delhi-based Bhushan Steel.

STEELING FOR THE FUTURE