JSW Steel set to buy 3 US firms

Announcement for the Rs 4,000-crore acquisition likely today.

Sajjan Jindal-promoted JSW Steel is set to acquire three US companies part-owned by elder brother P R Jindal for nearly Rs 4,000 crore.

Sources close to the development said the target companies would be Jindal Enterprises LLC, Jindal United Steel Corp (JUSC) and SAW Pipes USA.

Jindal Enterprises LLC is a wholly-owned subsidiary of PR Jindal group's flagship Jindal Saw. Jindal Enterprises holds a 49 per cent stake in JUSC, which has a steel plate mill with an annual capacity of 1.2 million tonnes.

A Jindal Saw subsidiary owns 19.47 per cent in SAW Pipes USA, which has an annual capacity of 50,000 tonnes of steel pipes.

The acquisition of the companies is expected to be announced tomorrow.

JSW may also announce a major land deal tomorrow. The speculation is that the company will acquire land in Kalina, near Mumbai's airport, for Rs 700 crore.

Sajjan Jindal, vice-chairman and managing director of JSW Steel, was not available for comment.

However, in a notice to the stock exchange, JSW said that a board meeting tomorrow would "evaluate the feasibility of acquisition of a plate mill, double jointing and coating and pipe mill facilities in the US after taking into account the due diligence reports submitted by international agencies".

After the notification, the JSW Steel stock jumped 1.53 per cent from the previous day's close on the Bombay Stock Exchange to end at Rs 576.45, after touching a high of Rs 604.

Similarly, the Jindal Saw stock surged 1.68 per cent to close at Rs 630.55, after touching a high of Rs 681. Sajjan Jindal had told Business Standard a fortnight ago his US acquisitions would be funded through a leveraged buy-out, which entails financing an acquisition by leveraging the target company's balance sheet.

JSW sources said after the acquisition, the company would ship slabs or billets from its Vijaynagar or proposed Bengal plant in India and then finish them at the rolling mills in the US.

At the last Jindal Saw board meeting, a committee was constituted to review the US operations and the next board meeting is yet to be scheduled.

Jindal Saw has toll conversion agreements with JUSC and SAW Pipes USA under which it provides the raw materials and the US companies manufacture finished goods and charge a manufacturing or tolling fee.

Jindal Saw markets these products through a Texas-based branch. Jindal Saw bought Saw Pipes from US Steel in 1993 and JUSC in 1997.