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LN MITTAL-controlled ArcelorMittal, the world’s largest steel company, will make a surprise entry into India by becoming a co-promoter of Uttam Galva Steel, a Mumbai-based steel firm promoted by the Miglani family, with whom the Mittals share old business ties.

ArcelorMittal has said that it would launch an open offer for a 29.4% stake in Uttam Galva at a price of Rs 120 per share, a 27% premium over a two-week average and 85% premium over a six-month average.

The ArcelorMittal statement said it has signed a share purchase agreement for a 5.6% stake on September 3 and a co-promotion agreement with the RK Miglani family and the company “in order to become a co-promoter and to obtain... board joint control rights”. If the open offer is fully subscribed, ArcelorMittal will obtain a 35% stake for Rs 500 crore, implying an enterprise value of Rs 2,800 crore.

Sudhir Maheshwari, member of the group management board of ArcelorMittal, was quoted as saying: “The transaction will provide ArcelorMittal with its first major manufacturing presence in India. The Miglani family has built a highly regarded quality company. The alliance will be an important component of our overall strategy for India, a country where ArcelorMittal aspires to become an integrated producer of the highest quality of steel.”

The Uttam Galva board, said ArcelorMittal Netherlands will make an open offer to the public shareholders of the Indian steelmaker and thus obtain the right to nominate executive directors and necessary veto powers.

In a notice sent to bourses, Uttam Galva said if the open offer is undersubscribed, the current promoters will offer shares to ArcelorMittal Netherlands to enable the new co-promoters and the Miglanis to have equal “relative” shareholdings.

The Uttam Galva spokesperson was not available for comment. However, the market as usual, seems to have sensed that a big announcement was on the cards. The Uttam Galva stock gained 10% to close at Rs 113.70 in a strong Mumbai market.

   The transaction is somewhat unusual in that there appears to be no previous instance of a company being declared a copromoter. It is unclear what triggered the announcement.

According to the notice sent to stock exchanges, the co-promotion agreement will result in an amendment to the articles of association of the company to incorporate the “rights and obligations of the parties involved”. The decision to induct AreclorMittal as a co-promoter was approved by the Uttam Galva board. The communiqué, however, did not mention the price of the proposed open offer, which will require FIPB approval.

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