The Grey Chronicles

2008.December.4

Mittal Brothers and NSC


National Steel Corporation has been in the middle of a tug-o-war game between the two Mittal brothers: Lakshmi and Pramod when NSC declared ‘cessation of operations’ in 1999. The historical records, as reported by journalists, are outlined below. The reader is adviced to form their own conclusion:


Note: These events transpired leading to the acquisition of NSC by GIHL in 2004.

From Philippine Star, October 1, 2003: Foreign steelmaker bids for National Steel Corp.

“The London-based LNM group, the world’s second largest steel producer, yesterday submitted a bid for the lease or purchase of the assets of the the National Steel Corp. (NSC).
LNM Holdings N.V. vice chairman Addiya Mittal said "with the LNM Group as its main strategic partner, the NSC has the potential again to become the largest integrated steel producer in the Philippines."”

From Manila Standard, November 05, 2003: German firm offers P7b for NSC

“LNM Holdings N.V. of Germany has offered to invest P7 billion, including a cash payment of P2.9 billion [?], for the rehabilitation of moribund National Steel Corp., a source privy to the negotiations with the government said yesterday.
The source said the German company plans to pour in P4 billion for repair and working capital to ensure the full rehabilitation of NSC’s steel mill in Iligan City.
LNM, the lone party that has publicly announced its interest to bid for the contract to rehabilitate NSC, also proposed a profit-sharing scheme with the NSC management. The bidding for NSC includes a proposal to lease and operate the Iligan steel plant, with an option to buy. ”

From Philippine Star, December 11, 2003 Indian firm ups offer for Nat’l Steel to P12.25-B

“Global Infrastructure Holdings Ltd. Inc. (GIHLI) increased its original purchase price for the National Steel Corp. (NSC) by P355 million and agreed to pay P1 billion up front for the debt-saddled steel company.
As negotiations intensified between GIHLI and NSC’s creditors, the Indian company poured more sweeteners into its offer and increased its original purchase price to P12.250 billion from P11.905 billion.
One government source told reporters that the negotiations with GIHLI were proceeding without major stumbling blocks, making it unlikely for its sister company, the Netherlands-based LNM Group Holdings N.V., to be able to return into the negotiating table.”

From Philippine Star, January 10, 2004: GIHL sweetens final offer for NSC to P13.25-B

“Global Infrastructure Holdings Ltd. (GIHL) had sweetened its final offer for National Steel Corp. (NSC) to P13.25 billion with P1 billion cash up front upon reaching a deal with the creditor banks. The balance of P12.25 billion would be paid over eight years.
GIHL’s original offer was P11.905 billion payable over 10 years and an up front cash of P655 million
They said that GIHLs offer was clearly superior to the LNM Groups proposal which relied on a profit-sharing component that would reportedly provide the banks with a total net present value five percent to 10 percent higher than GIHLs offer.
GIHLs offer, the sources pointed out, provided for hard cash regardless of loss or profit.
The defect of LNMs offer, the sources clarified, is that if there is not profit, the banks would get nothing.
Thus, the LNM Groups offer, the sources said, is iffy.
The LNM Group is still hoping that it can present its updated offer to the banks once the exclusivity period of negotiation between GIHL and the banks expires in February.”

From Philippine Star, January 15, 2004: LNM pushes counter-offer for National Steel

“LNM Holdings is making one last ditch appeal to the Department of Trade and Industry (DTI) to convince the creditor banks of the National Steel Corp. (NSC) to give LNM a chance to present its counter-offer for the mothballed steel firm.
<!–In a letter to Trade Undersecretary Gregory L. Domingo, Eric D. Tierie, general manager for marketing of LNM Holdings N.V., expressed the LNM Group’s dismay over what it perceives may be "political pressure" to conclude a deal with Global Infrastructure Holdings Ltd. even as two of creditor banks, namely China Bank and Credit Agricole Indosuez, are opposed to the deal.
LNM is offering a cash upfront of P2.5 billion against GIHL’s P1 billion.
LNM’s a annual payment would carry a full guarantee and 10 percent more than that given by GIHL which is only extending a limited guarantee.
GIHL, Tierie pointed out, has no experience in rehabilitating foreign steel plants while the LNM already has extensive and proven success in steel plants all over the world.
LNM’s investment and working capital in NSC for this year alone would be approximately $70 million as compared to GIHL’s $25 million.
The LNM Group would also be able to provide NSC the needed synergy with its global holdings as against GIHL which operates only in India.”

From Philippine Star, January 19, 2004: GIHL scores LNM over Nat’l Steel bidding issue

“Global Infrastructure Holdings Limited (GIHL) has finally broken its silence on the continuing complaints of the LNM Group over the bidding for the Philippine National Steel Corp. (NSC).
Speaking on behalf of GIHL, Sushant C. Das, president-designate of GIHL, expressed his regret yesterday over the recent statements by Eric Tierie of LNM Holdings N.V. describing the NSC bidding as "unfair."”

From Philippine Star, January 22, 2004: LNM Group continues to pursue bid for Nat’l Steel

“The LNM group will continue to pursue its bid for the National Steel Corp. (NSC) even after reports that majority of NSC’s creditor-banks have accepted the improved offer of Global Infrastructure Holding Ltd. (GIHL).
LNM Holdings marketing manager Eric Tierie said yesterday that LNM is now willing to translate its offer to more outright cash instead of a profit-sharing scheme.
LNM would offer 10 percent more than the P13.25 billion offer of GIHL or P14.575 billion with the amount payable in less than eight years and P2.5-billion payable upfront.
"LNM still has not been given a chance to present its own offer for NSC even after the exclusively period with GIHL has expired," Tierie said.
<!–Tierie expressed frustration over the lack of transparency and clarity over the bidding procedure.
Tierie said they are confused why the banks are still not willing to entertain LNM now that the exclusivity period has lapsed. ”

Tug-o-Bids for NSC

Tug-o-Bids for NSC

Annotation: Bidding closed on 15 January 2004. Rimando (2004) wrote "creditor banks awarded the deal to GIHL because the effective present value of GIHL’s financial offer (P5.8 billion) was about double the other bidder’s offer. GIHL agreed to keep the bank’s lien on the plant’s assets during the eight-year duration of the payment term."


Notes:

Rimando, Lala (2004). Newsbreak: A sleeping giant wakes up. Manila: The Philippine Daily Inquirer 13 September 2004. back to text

Advertisements

1 Comment »

  1. Hi. I am a long time reader. I wanted to say that I like your blog and the layout.

    Peter Quinn

    Comment by Peter Quinn — 2008.December.11 @ 11:00 | Reply


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: