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MUSCO Enters into JV with Sanyo Special Steel & Mitsui Co. Ltd.
Written by Vijay   
Tuesday, 15 November 2011
Mumbai: The Board of Directors of Mahindra Ugine Steel Company Limited (MUSCO) approved the slump sale of its steel business into its new 100% owned subsidiary (JV Co). MUSCO has subsequently entered into a joint venture agreement with Sanyo Special Steel Co Ltd. (Sanyo) and Mitsui & Co Ltd. (Mitsui), under which Sanyo and Mitsui will invest in the JV Co.

MUSCO is expected to drive general management, Sanyo will lead the manufacturing function while Mitsui will support the marketing function of the joint venture. MUSCO, Sanyo and Mitsui will collectively utilize their brands, technologies and networks to meet customers’ needs through this joint venture.

Both the transactions are subject to requisite approvals and satisfaction of certain condition precedents. Post consummation of the transaction, Musco, Sanyo and Mitsui will hold 51%, 29% and 20% equity stake respectively in the JV Co. Sanyo’s participation in the JV Co will be to the tune of approximately Rs 111 crores and Mitsui’s investment will be approximately Rs 76 crores subject to final closing adjustments as per agreed between the parties.

The joint venture is intended to help MUSCO achieve its goal of operational excellence, improved productivity and enhancement of both cost and quality to international standards to enable it to achieve its full business potential.

This joint venture is with a vision to synergise the efforts and resources of all parties to the JV Co to improve the production levels significantly from the current 120,000 tons in the next few years.

Sanyo’s technical assistance will enable MUSCO to strengthen and differentiate its product portfolio with the introduction of new products for niche and emerging market segments in India like the oil & gas, power, engineering industries among others. This is expected to further strengthen the profitability position of the company

Mitsui will assist the company in strengthening its sales and marketing footprints in the aforesaid niche and emerging segments as well as the existing alloy steel market in India. They will also help the JV to access global customers.

Through this JV, Sanyo expects to strengthen its global growth expectations by having a share of the growing special steel demand in India through the joint venture.

For Mitsui, this transaction is expected to strengthen its ties with the Mahindra Group which is one of Mitsui’s important business partners in India. Mahindra is one of the biggest business groups in India, with diversified operations across many business sectors like automobiles, tractors, IT, auto components, real estate, hospitality, non banking finance etc. Mitsui expects further opportunity for collaboration with the group across various business sectors where it is present.

 
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