JSW Steel has finally sewn up the deal to acquire Italy's second largest steelmaker Aferpi after hectic negotiations over deal size and plans to turnaround the facility.
The deal is said to be close to Rs 600 crore, slightly higher than the Rs 500- crore size that was quoted in March, when the two sides had come to an initial agreement on the sale.
The Sajjan Jindal-company had begun negotiations with the local administration and Cevital — the Algerian Group that had bought the facility in 2014 — and the final leg started earlier this week. Talks finally concluded on Thursday evening, local time.
A formal announcement is expected late Friday night, or Saturday.
"The deal will help JSW Steel to expand its reach in the specialised steel market, especially in the automobile sector," said a source.
The deal will mark a comeback by JSW Steel, which had lost out of Cevital in 2014, to buy Aferpi.
Cevital, the largest privately-held group in Algeria, had bought Lucchini in 2014 and renamed in Aferpi. Lucchini was then owned by Russia’s Severstal and was declared insolvent in 2012.
Aferpi has a capacity to produce 2.5 million tons of steel every year. It used to have an employee-strength of 2,000. Its operations include a blast furnace, a steel mill, a coke oven and a ports.
The deal will also make up for another lost opportunity for JSW group in Italy, last year. The company had lost to LN Mittal’s ArcelorMittal in the race to acquire Ilva, which owned Europe’s largest steel facility.
Presence in Italy will give JSW access to high margin products. At present Aferpi manufactures products used in sectors such as railways, energy, automotive and engineering. For instance, it products high speed rails that support some of the major rail networks in Europe.
With some of its facilities dating back to late 19th century, Aferpi was one of the centres of industrialisation in post-World War Italy. But since the commodity boom went bust after 2008, the company has been struggling to make a profit.
Cevital had promised to invest 300 million Euros after acquiring the company in 2014. The turnaround plant included the setting up of a new steel plant.
The JSW group company may opt to supply primary steel from its India-based facilities and convert them into high margin products in Italy. “Given the high margins for these products in Europe, this would make sense,” said an executive from the industry had told Moneycontrol in March.
Aferpi is currently working on projects that include production of 1 million ton of long steel products and revamping of wire rod and bar mills, installation of one electric arc furnace of 1 million ton capacity, with two continuous casting machines.