JFE Steel to invest $1 billion for a 14.99-per cent stake in JSW Steel

JFE Steel Corporation, Japan's second-largest and world's fifth-largest steelmaker, today said that it will invest about $1 billion for a 14.99 per cent stake in India's second largest steelmaker JSW Steel.

This is the second major overseas investment done by the Tokyo-based steel major in two days. Yesterday it acquired a 24 per cent stake yesterday in Pancheng Yihong Pipe, a Sichuan, China-based processor of high-quality seamless steel pipes. (See: Japan's JFE Steel to acquire 24 per cent stake in Chinese steelmaker)

Acquiring the stake in JSW would help JFE Steel to enter the growing market in India, while JSW would get the Japanese steel maker's technology as well as money for its expansion plans.

''JFE Steel will acquire a stake in JSW Steel by subscribing to a preferential allotment at a cost of Rs48 billion. The company plans to acquire 14.99 per cent voting rights and will make additional investments if the forthcoming acquisition does not reach this figure due to reasons including but not limited to possible fluctuations in JSW Steel's share price,'' said JFE Steel in a statement.

Based on JFE Steel's equity participation, the two companies plan to cooperate in a variety of areas, including JSW Steel's envisioned West Bengal steel plant project, which is currently on hold due to lack of funding.

JFE Steel, a wholly-owned subsidiary of JFE Holdings had entered into a strategic tie-up in December 2009 with JSW Steel, the Sajjan Jindal-led company, part of the O P Jindal Group, for automobile steel production and had considered buying stakes in each other. (See: Japan's JFE eyes stake in JSW Steel) 

JFE said that it will provide JSW Steel with technical assistance for the production of automotive steel and the implementation of operational improvements at JSW Steel's Vijayanagar Works that includes energy efficiency, environmental management, improvement of production process quality and yield, production capacity analysis and indices benchmarking.