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Bhushan Steel, Monnet Spat Revive Takeover Bids to Acquire Orissa Sponge
Jun 27,2012 10:35CST
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The takeover bids by three steelmakers to acquire Orissa Sponge have been revived after a three-year lull.

MUMBAI: The takeover bids by three steelmakers to acquire Orissa Sponge have been revived after a three-year lull. Two Delhi-based steelmakers - Bhushan Steel & Power and Monnet Ispat & Energy - have indicated their intention to acquire up to 20% in Orissa Sponge to extend their manufacturing presence in the resource-rich eastern state.

On Tuesday, Bhushan Steel, promoted by Brij Bhushan Singal and Neeraj Singal, revived their open offer, originally made in 2009, to buy up to 20% in Orissa Sponge at Rs 360 a share. Monnet Ispat will also pitch for the 20% stake at Rs 310 a share.

Bhushan Steel owns about 17% in Orissa Sponge, while Monnet Ispat holds 15%. About 30% is with the promoters - the Mohanty family. The Bhushan bid is considered more hostile in nature, as Monnet has a relationship with Orissa Sponge. The bids were put on the backburner for three years after the issue was dragged to the court.

The offer price is likely to be raised as it is based on the level at which the participating companies had bought shares in 2009, in Orissa Sponge from the open market, before the process was stalled following a court directive after allegations of irregular share purchases.

On Tuesday, shares of Orissa Sponge ended 1.1% down at 370.80 on the BSE.

In 2009, three companies - Bhushan Steel, Bhushan Power and Monnet Ispat - had made an offer to acquire Orissa Sponge by initiating negotiations with the promoters.

As of now, Bhushan Steel's offer of Rs 360 per share is the highest, with Sanjay Singhal's Bhushan Power and Monnet Group coming out with offers of Rs 300 and Rs 310 per share, respectively.

Later the promoters of Orissa Sponge filed a complaint against Bhushan Steel, saying that since Bhushan Steel had violated the takeover regulations, the open offer should be stalled. The court had referred the matter to Sebi.

The Orissa Sponge promoters' allegation against Bhushan Steel was that the company had bought shares in Orissa Sponge through a group company, which was not disclosed, amounting to violation of Sebi's takeover rules.

Orissa Sponge Iron was promoted by Torsteel Research Foundation in India in a joint venture with the Orissa government-owned Industrial Promotion and Investment Corporation of Orissa, to set up the first commercial coal-based sponge iron plant in India in the Keonjhar district of Orissa. The company was renamed Orissa Sponge Iron in 2005.

The company posted a revenue of Rs 38 crore in the year ended March 2012 and a loss of Rs 18.3 crore. It has the capacity to make about Rs 2,50,000 tonnes of sponge iron, a category of intermediate steel used by speciality steelmakers in place of scrap. Bhushan Power confirmed that the group's open offer will be at Rs 300, a share.

"It is an opportunity for us to expand our presence in Orissa," Monnet Ispat managing director Sandeep Jajodia told ET from Delhi. "The promoters have a strategic tie-up with us. We will provide them with technology to expand their capacity," he added.

Bhushan Steel also plans to leverage on synergies with Orissa Sponge.

takeover bids
Orissa Sponge
Bhushan Steel
Monnet Ispat

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