Mumbai: ArcelorMittal SA, the world's largest steelmaker, said on Friday it would form a joint venture with Japan's Nippon Steel & Sumitomo Metal Corp to bid for bankrupt steelmaker Essar Steel India Ltd.
The joint venture is the steelmaker's latest attempt to crack the world's fastest growing steel market, where it has struggled to make inroads due to bureaucratic delays despite trying for nearly a decade.
ArcelorMittal is in the final stages of signing a deal with India's state-run SAIL, with which it first signed a preliminary understanding in 2015 to jointly produce 1.2 million tonnes of automotive steel a year, but disagreements over commercial terms had delayed the venture.
The company said it submitted a plan on Feb. 12 to India's National Company Law Tribunal, which deals with insolvency and company disputes, to bid for Essar Steel in partnership with Nippon Steel.
Essar Steel was among a dozen of India's biggest debt defaulters that were pushed to bankruptcy court last year after a central bank order aimed at clearing $147 billion in bad loans at the nation's banks choked lending.
ArcelorMittal sold its entire stake in India's Uttam Galva Steels to the company's founders at less than the market price of the stock, a member of Uttam Galva's founding Miglani family told Reuters last month.
The sale could free ArcelorMittal to bid for other Indian steel assets which are being auctioned off as part of insolvency proceedings.
"Partnering (with Nippon Steel) for Essar Steel was always our intention and adds further strength to our offer," said ArcelorMittal's India-born Chief Executive Lakshmi Mittal.
Kosei Shindo, president of Japan's biggest steelmaker, said if the joint venture's bid to acquire Essar Steel succeeds, it would help Nippon Steel tap into the Indian market "where steel demand is expected to grow sharply in the mid- and long-term" and be a key growth driver for the company.
Shindo, speaking to reporters in Tokyo after unveiling its new three-year business plan, said ArcelorMittal will take a majority stake in Essar Steel, but should not be much higher than Nippon Steel's interest, declining to give further details on the joint venture.
ArcelorMittal and Nippon Steel have a history of forming joint ventures, with the oldest dating back to 1987, and the most recent one happening in 2014.
Nippon Steel collaborates with Tata on automotive steel in India and their relation would not change after the possible purchase of Essar, he said.