JSW Ispat merges with JSW Steel

MUMBAI: Sajjan Jindal-led JSW Steel on Saturday announced the merger of JSW Ispat (formerly Ispat Industries) with itself, making the combined entity the second largest Indian steel company with a capacity of 14.3 million tonne per annum. JSW steel had acquired Ispat Industries from the Mittals in December 2010 for Rs 2,160 crore.
The boards of JSW Ispat and JSW Steel, which met here, approved the merger proposal on Saturday with an exchange ratio of 1:72 which effectively means that JSW Ispat shareholders will get one share of JSW Steel for every 72 shares held by them in JSW Ispat.
“The merger of JSW Ispat with JSW Steel is an important step in our ongoing growth journey towards creating a world class global steel company. JSW Ispat brings several unique advantages and the merger will help in realization of integration benefits of the two companies”, said Sajjan Jindal, chairman and managing director of JSW Steel adding that this gives the company an opportunity to do brownfield expansion in its steel units in Vijaynagar and Dolvi.
The merger completes the integration of the two businesses and enables the full realization of strategic benefits resulting from the combination. Post-merger the promoters of JSW Steel will hold 35.12% in the merged entity, JFE Steel with 14.92% stake will be the second largest shareholder. “They (JFE Steel) have the approval to bring in more cash and take their stake back to 15%,” said Sajjan Jindal.
The net debt level of the merged entity will be Rs 25,200 crore with a debt to equity ratio of 1:1.15. According to Seshagiri Rao, joint managing director and group CFO, the merger will bring down interest cost of JSW Ispat by Rs 250 crore. “JSW Ispat is loss making, so it is paying 3.66% more interest on loans,” he said.
The integration of JSW Ispat into JSW Steel is expected to bring significant strategic advantages with it, particularly alternative steel making technologies, ability to achieve swift capacity expansion, shore based facility and pan India expansion of market reach. The merger completes the integration and aims to capture full value of the combination, said a JSW statement on Saturday.