Tata Steel plans to acquire the steel business of Usha Martin Limited (UML) by its subsidiary Tata Sponge Iron Limited (Tata Sponge).
The company had executed definitive agreements for acquisition of the steel business of UML by itself or any of its subsidiaries or affiliates.
Tata Sponge, a 54.5% subsidiary of Tata Steel, engaged in the sponge iron business, has been evaluating various strategic options to enhance its product portfolio and has identified an entry into steel manufacturing in long products as a route to ensure sustainable value creation for its shareholders, the company said in a statement.
Considering the alignment in the views of Tata Steel and Tata Sponge with regard to the latter’s strategy of focusing on long products, Tata Steel as the promoter shareholder of Tata Sponge, has agreed to support Tata Sponge’s strategy and has identified it as the strategic vehicle to undertake the acquisition of the steel business of UML, the statement added.
In order to acquire the steel business of Usha Martin in furtherance of its growth strategy, the Board of Tata Sponge has announced a financial plan to raise capital through a Rights Issue of equity shares, debt and mezzanine finance.
Tata Steel has noted the financing plan and confirmed its support, in-principle to the overall financing structure, said the statement adding that once Tata Sponge finalises the specifics of the above plan and approaches Tata Steel for investment support as may be necessary, the same will be considered by the Board of Tata Steel at the appropriate time.