Essar ups holding in steel to 87%, skirts open offer

The Essar group has scaled up its holding in Essar Steel to 87.09 per cent from 74.82 per cent through a merger, thereby avoiding an open offer.

Asia Steel Holdings, a financial investor holding 12.27 per cent in the company, has been merged with Essar Steel Holdings, a subsidiary of the group's principal investment firm, Essar Global. The merger was approved by the Supreme Court of Mauritius on Monday.

The Securities and Exchange Board of India's (Sebi) takeover code requires anyone buying more than 5 per cent in a company in a year to make an open offer for a further 20 per cent to the other shareholders.

This is the second time in the last three months that Essar has scaled up holdings in group companies. Essar Global has increased its holding in Essar Oil to 87 per cent, and in Essar Shipping to 76 per cent, for $850 million.

The acquisition in these two companies did not require open offers since they were done through global depository receipts.

The Essar group has been consolidating its business across the globe under the Cayman Islands-based holding firm Essar Global. Ernst & Young is the group's adviser in this exercise.

The consolidation of businesses into a single balance sheet and the ability to access international capital is likely to provide Essar Global a platform to emerge as a diversified conglomerate with interests in steel, oil and gas, power, shipping and logistics, telecom and BPO, and construction

Recently, Essar Global floated a wholly owned subsidiary, Essar Shipping and Logistics, in Cyprus, to consolidate its logistics business. The logistics business is being run by Essar Shipping, Essar Logistics and Vadinar Oil Terminal.

There has also been speculation that the group might delist these three companies in the near future. However, this could not be ascertained because the Essar spokesperson was unavailable for comments.

According to the Sebi norms, a company may delist promoters holding in excess of 90 per cent of its stocks. The group last week announced delisting of Essar Teleholdings.