Jindal Steel and Power (JSPL) on Thursday announced the acquisition of the Oman-based Shadeed Iron & Steel for $464 million.

Its project at Sohar in the sultanate is setting up capacity to produce 1.5 million tonnes of hot briquetted iron a year.

The Indian company’s director, Sushil Maroo, told media the acquisition was part of plans to expand operations overseas. “The Sohar plant is a gas-based unit. We are also setting up some gas-based steel units. It is a strategic fit for us,” he added. The acquisition was made through JSPL’s subsidiary, Jindal Steel & Power Mauritius.

The Jindals had only recently said it was terminating talks with Al Ghaith Holdings of the UAE, which owns Shadeed, because of “many open issues.”

Thursday’s statement said the two sides were subsequently “able to resolve several of their outstanding issues in relation to the title and contracts with the Oman government that gave the company comfort to proceed with the transaction.”

Among other factors there was a title ownership issue due to existing transactions of the Oman company with a British Virgin Islands company. The islands are a tax haven.

In a communication to the stock exchange, JSPL said a definitive share purchase agreement and other transaction documents had been signed at $464 million, including liabilities.

According to Maroo, his company had tied up $400 million in debt financing from international banks. The rest of the money needed for the acquisition would come from internal accruals.

The company said the Oman project was engineered by Kobe Steel of Japan and Midrex of the US, leaders in direct iron technology. “We believe the facility can be made operational within a year. This is also the same technology we will use in our Orissa project. The additional experience will help bring this new facility on stream in a timely manner,” Maroo said.

Maroo described the acquisition as a major step in the international strategic expansion of the Jindal company, which recently acquired several coal and iron ore mines in Africa and Bolivia.

Another Jindal official, explaining why the company chose the Oman firm, said there was strong demand for steel in West Asia and North Africa, where the supply shortfall was estimated at over 15 million tonnes. The Oman plant would help meet this shortfall to an extent. He declined to say if any other company was also in the running for Shadeed.

With an annual turnover of $2.5 billion, JSPL is part of the over $12 billion diversified O P Jindal group.

The company’s investment commitments in steel, power, oil & gas and mining have topped $30 billion. In the recent past, it has expanded its steel, power and mining businesses to various parts of the world particularly in South America, Africa and Asia.

ranjitbhushan@mydigitalfc.com