Essar group has reached a deal to acquire majority stake in Zimbabwe Iron and Steel Company (Zisco) and would invest an estimated $750 million for revival of the African nation's state-run steel maker.
The Ruias-led Indian conglomerate said in a statement that its privately held company Essar Africa Holdings has reached an agreement with the Government of Zimbabwe for revival Zisco.
While Essar did not disclose the investment amount, sources said it would make an initial investment of $750 million to help restart of operations at the Zimbabwe firm, which had ceased operations due to capital constraints.
Last year, the Zimbabwe government had agreed to sell its majority stake in Zisco and then launched a public tender for the same.
As per the deal, Essar Africa Holdings and Zimbabwe government would set up two joint venture companies that would acquire all the steel and mining related assets and liabilities of Zisco and its subsidiaries.
Essar and Zimbabwe government would own 60% and 40% stake respectively in the steel JV. On the other hand, the minerals JV will be owned 80% by Essar and 20% by the government of Zimbabwe.
The transaction will close in due course upon facilitation of various approvals, including approvals from the enabling ministries and a settlement for transfer of Zimbabwe government's guaranteed debt obligations of Zisco to Essar.
Zisco is an integrated steel company with capacity of 1 million tonne for manufacturing of long products. It has been non-operational for the last few years due to shortage of funds and maintenance of plant and equipment, irregular supply of power and other critical raw materials and infrastructure.
Zisco also owns iron ore and limestone mining rights and other claims, which require significant investment in exploration and development.
Commenting on the deal, Zimbabwe's Industry and Commerce Minister Welshman Ncube said that Essar emerged as the preferred bidder for Zisco from among several international players.
Essar Africa Holdings Resident Director Firdhose Coovadia said the new ventures would be "well positioned to be a low-cost steel producer that can meet the growing demands of the regional steel market and capitalise on the forecast growth in sub-Saharan Africa."
"The Essar Group has the track record of successfully commissioning and operating greenfield and brownfield steel plants in different parts of the world including India, Canada, UK and Indonesia," he added.
Zisco Chairman Nyasha Makuvise said various stakeholders of Zisco, especially employees, would benefit significantly from the Essar deal.
The deal marks Essar group's further expansion in Africa, where its current operations include oil and gas assets in Nigeria, Kenya and Madagascar, telecom assets in East Africa, BPO operations in South Africa and coal concessions in Mozambique.
The group has presence in a host of sectors including steel, oil and gas, power, communications, shipping, ports and logistics and minerals.
The group has 70,000 people across its operations in more than 20 countries in 5 continents, including Asia, Africa, Europe, the Americas and Australia.
