The Ruias of the Essar group have decided to get into yet another takeover battle.
And this time they are taking on none other than Lakshmi Narayan Mittal, the owner of world's largest steel maker, ArcelorMittal, to take over the Bulgarian steel firm, Kremikovtzi AD, an ailing steel mill owned by Mittal's younger brother Pramod Mittal.
"As a group, we are always looking out for opportunities in the world. We cannot comment on any specific proposal," a Essar group spokesperson said.
Insiders, however, said the company's representatives are meeting the union leaders of the ailing company on Friday to seek their support for any possible takeover battle. The company's unions representing 2,000 workers are battling the management as their salaries were delayed in February and March this year and they did not receive their food allowance since November last year.
Though the company is sold by its bankers, the support of the unions is crucial for the turnaround of the company in the future.
This will be the second steel project across the world where the Ruias are competing with Lakshmi Mittal directly. Both the groups alongwith the Tatas are in a race to buy a stake in a joint venture to be floated by Indonesian steel firm PT Krakatau Steel. The greenfield project would require investments worth $3 billion from the winning partner and the Indonesian government will take a call on how to go about finding the partner.
Incidentally, for the Bulgarian firm, ArcelorMittal has already granted an emergency loan of Euro30 million so that the company can pay salaries and take care of its other costs.
The debtors of the company had asked the Bulgarian firm to immediately repay a loan of Euro350 million. Since then, the company is struggling to meet its working capital requirements.
Apart from the Ruias and Lakshmi Mittal, Ukranian billionaire Konstantin Zhevago is also vying for the Bulgarian company. A decision to declare the company as insolvent would be take in late July by a local court.
In 2005, Pramod Mittal had taken over 71 per cent stake in Bulgaria's biggest metalworking firm, Kremikovtzi, for $110 million. However, the company continued to make huge losses and in spite of assurances from younger Mittal to continue support for the company,its debt obligations witnessed extreme price volatility.
As the company failed to meet its obligations, Mittal had to seek emergency funding from his elder brother.
The debtors have now put the company on the block and a committee will decide the winner of the offers received from all parties.
Essar Steel is also fighting a takeover battle with Russian metal firm OAO Severstal for the acquisition of the American steel firm, Esmark Inc.
The $1.3-billion takeover of Esmark is currently tied up in arbitration as its unions are opposing the Essar bid and have supported Severstal bid. A decision on the Esmark arbitration is expected on Saturday.