India's third largest steel producer JSW Steel said on Tuesday it plans to buy an 84-per cent stake in Ispat Industries for Rs 2,157 crore ($476 million) to expand capacity in the country.
The company will subscribe to 1.09 billion shares via preferential allotment at a price of Rs 19.85 per share, it said in a statement.
Based on the closing price of Ispat shares on Monday, JSW is buying the stock at a discount of 20 per cent. Shares of Ispat fell as much as 17 per cent after the news while shares in JSW Steel rose as much as 5 per cent.
Analysts said JSW ended up paying less for the deal than had been expected.
Shares of Ispat had risen more than a quarter since the beginning of December on speculation that ArcelorMittal, Tata Steel and JSW were looking to buy the struggling firm.
Ispat is controlled by Pramod and Vinod Mittal, the brothers of the world's fifth richest man, billionaire Lakshmi Mittal, who heads the world's largest steelmaker Arcelor Mittal.
Lakshmi Mittal branched out on his own in 1976 due to differences with the family.
Ispat has posted losses for the past five years except for fiscal year 2008. Its net loss narrowed to 3.2 billion rupees in the year-ended March 2010 compared with a loss of Rs 690 crore in 2008-09 year.
Kotak Investment Banking represented Ispat on the deal, sources previously told Reuters.
src-BS
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