Thursday, May 20, 2010

(Adds executive's comments on deal) 


 
   By Prasenjit Bhattacharya 
   Of DOW JONES NEWSWIRES

NEW DELHI (Dow Jones)--Jindal Steel & Power Ltd. (532286.BY) Thursday said it has agreed to acquire Oman-based Shadeed Iron & Steel Co. LLC for $464 million, as the Indian company seeks to grab a slice of the growing steel market in the Middle East.

"The Gulf is still a region where steel demand is high. Besides, we are getting to buy a plant which is almost ready for operation," Jindal Steel Finance Director Sushil Maroo told Dow Jones Newswires. The supply of natural gas for the plant has also been finalized, he said, elaborating on the reasons for the deal.

Jindal Steel, part of the steelmaking conglomerate O.P. Jindal group, has been active in overseas acquisitions and projects over the past few years. The company is developing an iron ore mine and building a steel plant in Bolivia. It is also seeking to develop two coking coal mines in Australia, jointly with Rocklands Richfield.

Jindal Steel said in a regulatory filing the purchase price includes taking on of Shadeed's $79 million debt.

The Indian steelmaker has arranged $400 million as debt from foreign banks for the acquisition, and will fund the remaining amount from its cash flow. The acquisition is being done through Jindal Steel's wholly owned subsidiary in Mauritius.

Maroo said Jindal Steel currently has INR85 billion ($1.8 billion) in debt and around $500 million in cash reserves.

He said Jindal Steel will invest $60 million over the next 12 months in the 1.5 million metric tons a year sponge iron plant that Shadeed is building in Oman. The plant is likely to start making sponge iron from the July-September quarter, he said.

Maroo said the Oman plant could get raw materials from the company's coking coal and iron ore mines in Africa and Bolivia, while it would look to sell its finished products in North Africa and the Middle East, to start with.

He said also that Jindal Steel expects to spend around $800 million in the fiscal year that started April 1 to boost its production capacity in India.

-By Prasenjit Bhattacharya, Dow Jones Newswires; 91-11-4356-3358; prasenjit.bhattacharya@dowjones.com

(END) Dow Jones Newswires

20-05-10 0900GMT