CCI gives approval to proposed JSW Steel-JSW Ispat merger

The Competition Commission of India has approved the proposed merger of JSW Ispat Steel Ltd with JSW Steel Ltd, a deal that would create the country's second largest steel producer.

Giving its approval, the fair trade regulator in an order dated October 25 said the combination is "not likely to have an appreciable adverse effect on competition in India". JSW Steel Ltd is the single largest shareholder of JSW Ispat Steel Ltd, with a shareholding of 46.75 percent, and also has management control.

The CCI observed that the control over activities carried out by JSW Ispat before and after the proposed amalgamation would remain with JSW Steel. "... considering the presence of large integrated as well as non-integrated domestic steel producers, absence of major trade barriers for import of steel products and plans of further capacity expansion by most of the steel producers in India, the proposed combination is not likely to give rise to any adverse competition concern in India," the order said.

The merger, once complete, would create the second largest domestic steel producer with an annual steel production capacity of 14.3 million tonnes. A notice seeking the Commission's approval was submitted by the two companies on September 28. The deal was approved by the respective boards of the entities on September 1. The merger would be based on 1:72 share swap ratio (shareholders of JSW Ispat would get one JSW Steel share for every 72 shares they hold).

JSW Steel had acquired 41-percent stake in debt-ridden Ispat Industries from Pramod and Vinod Mittal, brothers of the steel czar LN Mittal, in December 2010 for about Rs 2,157 crore. Ispat Industries was subsequently named as JSW Ispat. Post-merger, promoters of JSW Steel would have 35.12 per cent stake in the merged entity.