Creditors of Essar Steel India Ltd <ESRG.UL> have approved a joint offer by ArcelorMittal SA <MT.AS> and Japan’s Nippon Steel & Sumitomo Metal Corp <5401.T> as the final bid for the debt-laden asset, ArcelorMittal said in a statement on Friday.
This paves the way for the two companies to take control of the 10 million tonne-per-year Essar Steel plant, marking the first participation of global steel majors in the fast-growing Indian steel market without a local partner.
ArcelorMittal and Nippon Steel said they have already drawn up plans to double output of the unit in the coming years.
“A long-term aspiration (is) to increase finished steel shipments to 12-15 million tonnes through the addition of new iron and steelmaking assets,” ArcelorMittal said.
Essar Steel’s mill in the western state of Gujarat is currently operating at 6.5 million tonnes a year due to constraints from iron ore supply and shortages of natural gas used to run its furnace.
The approval potentially brings to a close a year-long tussle for one of the most attractive assets under the new insolvency process in India. Essar Steel’s assets had drawn interest from Indian steelmakers such as JSW Steel <JSTL.NS> and Vedanta Ltd <VDAN.NS>, and banks such as Russia’s VTB Bank.
ArcelorMittal and South Korean steel giant Posco <005490.KS> have also been trying to set up a steel mill in India for more than a decade, but problems with land acquisition have kept their plans from going forward.
Posco dropped its plans to build a steel unit in the eastern state of Odisha last year.
In its statement on Friday, ArcelorMittal said the company would pay a total of 420 billion rupees ($5.73 billion) towards Essar Steel’s debt and put another 80 billion rupees into operations and profitability.
“ArcelorMittal will own the majority stake, and Nippon Steel will own a nearly equal stake,” a Nippon Steel spokesman said.
The companies would increase the output of Essar Steel to 8.5 million tonnes a year, from 6.5 million tonnes, and later take it up to 15 million tonnes a year, the statement said, without giving a timeline.
The news comes a day after founders of Essar Steel came in with a surprise offer to pay 543.89 billion rupees ($7.4 billion) to creditors to settle claims, and allow the company to exit the bankruptcy process.
Essar’s founders – the Ruia family – have tried to hold on to the steel asset, first through a minority stake in VTB-led consortium Numetal, which bid for Essar Steel, and later via a last-ditch effort on Thursday through an independent offer.
The tussle between Numetal and ArcelorMittal went all the way to India’s Supreme Court, which this month ruled that any bidders would have to settle all pending dues tied to any distressed assets they were associated with before they could bid for the steel plant.
ArcelorMittal announced last week that it had cleared the dues of Uttam Galva and KSS Petron, two other smaller defaulters that it was previously associated with.
Essar Steel was among a dozen of India’s biggest debt defaulters pushed to bankruptcy court last year by a central bank order aimed at clearing $147 billion in bad loans.