buyout brigade ready for action

http://www.telegraphindia.com/1090806/jsp/business/story_11326712.jsp

Buyout brigade ready for action
Coal firm on Essar radar

Mumbai, Aug. 5: The Essar group is in advanced talks to acquire coking coal company Caledon Resources Plc, having mining interests in Australia, for up to $1 billion.

Sources said Mumbai’s Essar had been scouting for coal assets abroad for at least a year as its steel and power companies expand capacities in India.

Caledon is listed both on the AIM, the London Stock Exchange’s international market for smaller companies, and the Australian Securities Exchange.

Essar Steel’s unit in Gujarat is slated to increase production from 4.6 million tonnes (mt) per annum to 10mt by 2010-11.

The steel-making unit’s expansion will be based on the blast furnace and corus technologies, both of which require coal as a fuel.

Essar Power is also expanding its capacity to 6,000MW from 1,200MW through four projects that are under implementation. Two of these are in Gujarat, and the others in Madhya Pradesh and Jharkhand.

The additional capacity is expected to be installed by 2012, and three of the plants will require coking coal.

While some of the coal requirement may be met by the domestic market, the company will also have to heavily depend on imports.

Caledon Resources, which produces and explores coking coal in the Bowen region of Queensland, has also been in talks for a takeover with a Chinese company, sources said.

In January this year, Caledon had said RBC Capital Markets was scouting for a buyer, and the coal firm was in discussions with a number of parties.

The number of potential buyers has now come down to two — the $15bn Essar group and a Chinese company — and a deal is likely to be clinched soon, the sources said.

Essar did not comment on the takeover talks.

“As a group we keep looking at growth opportunities. However, it is not our policy to comment on any specific proposal,” said a group spokesperson.

It is not yet known how Essar plans to finance the transaction, but the sources said this was a potentially big deal and could amount to a $1-billion transaction.