Following an agreement with Ispat Industries for acquiring a majority stake in the debt-ridden company, India’s third largest steel maker JSW Steel will announce an open offer on Wednesday, JSW Vice Chairman & Managing Director Sajjan Jindal told reporters here today.
Ispat Industries will issue on a preferential basis, 108.66 crores equity shares at Rs.19.85 per share for a consideration of Rs 2,157 crores.
While JSW’s holding will be at 41.29% on completion of preferential allotment, with a scope to go up based on the outcome of the open offer, the existing promoters will hold 26% on completion of transaction. Dilution of holding for both the parties will occur if there is a capital raising in the future, he said. After the open offer, the total stake may go up to 51%, he said.
JSW will further re-finance the entire outstanding debt of Ispat. Ispat had outstanding debt of Rs 7,156 crore as of June 30.
Ispat Industries will be renamed JSW Ispat Steel Ltd and will remain as a separate entity. Sajjan Jindal will be the Non Executive Chairman of the company while Vinod Mittal will be Executive Vice-Chairman during the transition period and subsequently function as a Non-Executive Vice Chairman.
JSW will have a first right of refusal whenever Mittal dilutes his stake in the company, Jindal said. The director board representation will be in 1:2 ratio, in favour of JSW.
The company will repay its entire Rs 7,500 crore debt to its lenders and will raise further debt from new lenders at a cheaper rate. The present average lending rate is 9.9% and the company is looking at reducing it by 4%, he said.
According to Jindal, the lenders have given time till September 2011 to settle the debt. The company has not zeroed in any new lenders, but will do it soon, he said. The amount for acquisition is from internal accruals, he said.
Ispat Industries has called for a Shareholders meeting on January 18, Vinod Mittal said. Enam Securities Pvt. Ltd. was the exclusive financial advisors to JSW for the transaction and Amarchand Mangaldas and Suresh Shroff were the legal advisors. Kotak Investment Banking was the exclusive financial advisor to Ispat Industries Ltd for the transaction and Economic Laws Practice were the legal advisors.