Arcelor acquires Thailand’s G Steel

Arcelor Mittal, the world's largest steel company, will become the largest shareholder of Thailand’s financially troubled G Steel Plc after agreeing to pay US$250 million to acquire 40 percent of the SET-listed hot-rolled steel manufacturer.

The agreement will be signed in Bangkok today, allowing the Luxembourg-based company to acquire new shares of G Steel, a company founded by steel tycoon Somsak Leeswadtrakul, said a company executive.

Following the capital increase, the Leeswadtrakul family will see a dilution of ownership in G Steel.

Details of the fresh capital to be injected by the new investor and the price per share are expected to be released today after the signing.

Having the new investor will be a significant step toward a business turnaround for G Steel following the completion of its US$200-million debt restructuring with bondholders late last year.

The company is also in the process of restructuring another $500 million with trade creditors and a portion of the debts have already been agreed on, another G Steel executive said.

Stock analysts pointed out that the capital injection from the new investor is key to G Steel's survival at a time the industry is recovering in terms of both demand and prices.

"So far, the business of G Steel has been plagued by the lack of working capital that causes banks to be reluctant to extend loans to it," said an analyst from Globlex Securities.

G Steel, which is also scheduled to release its 2010 financial results today, is under pressure to conclude the deal given the requirements of the Stock Exchange of Thailand.

If G Steel's 2010 financial results fails to win approval from its auditor for the third consecutive year, the company will be at high risk of being forced to delist from the SET, the Globlex analyst said.

"Consequently, I think G Steel does not have much time left to negotiate with the new investor about the share price," he said.

This year, the steel industry is expecting growth in the range of 5 percent and 7 percent in terms of domestic demand to about 15 million tonnes while steel prices have been on the rise since late 2010. Hot-rolled steel plate is projected to grow at a faster pace, thanks to high demand from the automotive industry.