Going out of town

Calcutta, June 2: Tata Iron and Steel Company (Tisco) has decided to bid for state-run steel company Krivorijhstal of Ukraine.

This is the first overseas company that Tisco is trying to acquire. The plant has been put on the block by the Ukrainian government.

The bidding, floated by the Ukrainian State Property Fund, opened on May 12 and will close on June 4. Negotiation with the lead bidder is expected to begin on June 11, sources said.

A Tisco spokesperson said the company has decided to bid for the Ukrainian plant independently.

However, industry sources said there were possibilities of a consortium bidding for the plant with the Tatas as the leader. The names of the companies which may join the consortium could not be ascertained.

The starting bidding price for the company’s 93.1 per cent stake has been fixed at $714 million. However, industry sources said the bid may go over and above $1.5 billion. The total capacity of the plant, which produces both long and flat products, is six million tonnes.

Other major bidders include OAO Evrazholding of Russia, Industrial Union of Donbass and Investment Metallurgical Union. Some bidding firms that have formed partnerships are Sverstal and Arcelor; and the L N Mittal group and US Steel Corporation.

Though Tata Steel has a technology tieup with Arcelor, the latter has preferred to tie up with Sverstal of Russia.

Sverstal North America (formerly Rouge Industries), which is at present the fifth largest steel producer in the US, and its consortium partner Arcelor are said to have decided to invest $1 billion to acquire the plant.

Arcelor has, in fact, confirmed that the joint bid for Krivorijhstqal is in line with the company’s strategy to expand in eastern Europe. The consortium is also planning to increase production at the Ukrainian plant, which at present contributes 20 per cent to the country’s total steel production, to 10 million tonnes.

The LN Mittal group, the second-largest global steel producer, is equally keen to acquire the Ukrainian plant to consolidate its position in eastern Europe. Tisco is also interested in the iron ore mines — Krivrorog — which is expected to be divested later this year.

Krivrorog, owned by UkrrudProm, is said to have huge deposits of good quality iron ore.

On the investible fund, Tisco sources said the company does not see any problem in mobilising the fund. In fact, it has an investible corpus of over $1.5 billion, according to sources.