Tokyo: JFE Holdings Inc, Japan’s second-biggest steelmaker, plans to invest about $1 billion in JSW Steel Ltd, Bloomberg reported, citing a person with knowledge of the deal.
JFE plans to buy securities convertible into shares at a minimum price of Rs1,300 ($27.59) each, and may own a little less than 15% of JSW after conversion, Bloomberg said.
The deal’s announcement could be imminent as cash-hungry JSW, India’s third-largest steelmaker, said on Thursday that its board will consider issuing shares to qualified institutional buyers on 27 July. JFE and JSW will both announce first-quarter results that day.
Financial sources in Mumbai have said the transaction could be for below $1 billion as JFE is looking at striking a deal closer to JSW’s current market price.
Given JSW’s current market value of $4.8 billion, an investment of $1 billion by JFE for a 14% stake would represent a premium of nearly 50%.
JFE Steel spokesman Eiji Okumura said the firm is considering taking a stake in JSW but that nothing has been decided.
Sajjan Jindal, JSW Steel’s vice chairman, said last month that JFE may buy 5% to 15% of the company, and that The Economic Times reported in April that JFE is in advanced talks to buy a 14.06% stake in JSW for about $1.1 billion.
JFE Steel, the main steelmaking unit of JFE Holdings, and JSW had agreed in November on an alliance that could include the two companies taking stakes in each other.
A partnership with JSW would give the Japanese company a crucial foothold in India as it aims to boost supply of its high-grade automotive sheet steel to Japanese carmakers like Toyota Motor Corp and Nissan Motor Co, which have set up manufacturing bases in Asia’s third-biggest economy.
Bigger rival Nippon Steel Corp plans to form an automotive sheet steel joint venture with India’s top steelmaker Tata Steel Ltd by the end of the 2012 financial year.