17 June 2015, Lagos – Premium Steel & Mines, a company owned by Mr. Sunil Vaswani and other institutional investors, has successfully acquired Delta Steel Company Limited (also known as Aladja Steel) from the Asset Management Corporation of Nigeria (AMCON) in a multibillion naira deal.
AMCON and Premium Steel, THISDAY learnt from sources conversant with the transaction, closed the sale in March this year, paving the way for the new owners to take over the steel plant and all of its non-core assets such as its workers’ quarters, schools and hospitals.
The deal, according to a source, was struck after Premium Steel offered to pay a sum higher than what was paid by Global Steel Holdings Limited (GSHL), promoted by Mr. Pramod Mittal, to the federal government through the Bureau of Public of Enterprises (BPE) almost a decade ago.
BPE had sold Delta Steel in 2006 under controversial circumstances to Pramod Mittal, the younger brother of Lakshmi Mittal, an Indian multibillionaire and Chairman/CEO of ArcelorMittal, the world’s largest steel manufacturer.
However, the administration of President Umaru Musa Yar’Adua reversed the privatisation of Delta Steel when it was discovered that GSHL breached the terms of the sale by failing to inject equity into the company.
Instead, it borrowed heavily from Zenith Bank Plc and other Nigerian banks, but failed to repay the banks, thus forcing them to sell their non-performing loans (NPLs) to AMCON between 2011 and 2012.
It was on this basis that AMCON, with the approval of the Federal Ministry of Mines and Steel, undertook to sell the steel complex.
An initial attempt by AMCON to sell the plant in 2013 was botched when a Nigerian consortium failed to meet the payment terms.
AMCON then reopened the process to sell Delta Steel last year under which a Chinese consortium fronted by Nigerians and Premium Steel emerged bidders for the steel plant.
During negotiations with AMCON and its advisers for the sale, Premium Steel was said to have offered more than the Chinese consortium to emerge as the preferred bidder.
Although the source declined to disclose what Premium Steel paid for the Delta plant, he said AMCON sold it at a loss since the NPLs it took over from the banks, including interest charges, were valued at N35 billion on AMCON’s books at the time of the transaction.
However, AMCON felt that it would be better to transfer the plant to new owners with the expertise and financial capacity to inject capital, revitalise Delta Steel and create thousands of jobs.
Efforts to reach Vaswani, who holds dual Indian and Nigerian citizenship, and along with his family owns Stallion Group, an African conglomerate specialising in automobile manufacturing and sales, agriculture and agro-processing, real estate, financial services, steel manufacturing, logistics and shipping, to comment on the transaction were unsuccessful.
The Managing Director/CEO of AMCON, Mr. Mustafa Chike-Obi, was also unavailable for comment.
Delta Steel, a fully integrated steel complex, was set up by the federal government in the 1980s under its industrialisation policy. However, like the Ajaokuta Steel Company in Kogi State, Delta Steel has been lying moribund for decades.
In a statement issued by the company yesterday, Premium Steel said it had established an elaborate plan for revival and is set to resuscitate the plant with new investments of N70 billion in the first phase and N300 billion in further phases.
“The investor’s plan includes a substantial socio-economic value chain in the Delta region, through revival of the current plant to 1 million metric tonnes capacity and thereafter expanding capacities and establishing industries for other value added products.
“The product range at the complex is aimed at optimal utilisation of the country’s mining and gas resources and produce import substitution products, whilst providing gainful employment to the community,” the company said.
It added that a critical area of its plan is also to foster the welfare of the communities with assistance in the areas of education and healthcare.
“Premium has taken over only the assets with a commitment for the restoration of the operations, but the liabilities still remain the responsibility of AMCON and the plant’s receivers,” it said.
In February, the Minister of Mines and Steel Development had appeared before the Senate Committee on Power, Mines and Steel and explained that AMCON had given Delta Steel the opportunity to pay back the loans, but the company was unable to do so and the grace period had long lapsed.
The minister had informed the committee that there were no previous claims that Delta Steel was a privately owned company, but it took loans from the local banks, and by Nigerian law, AMCON was put in place to make sure that banks do not fail.
Despite its acquisition, Premium Steel acknowledged that its challenges as new investors in Delta Steel are “enormous and need perseverance, patience and financial strength for resolution”.
The Delta Steel plant, it said, is in a very bad state of decay with overgrown weeds, burnt down facilities and vandalised equipment and other damaged infrastructure.
“Significant work and investments are required to restore the completely burnt down sub-station, blown off roofing, cannibalised furnaces, rusted scrap management machines, damaged cables and DRI plant.
“Past employees and the communities have suffered immensely for lack of gainful employment and non-settlement of their rightful dues. Their obligations need to be resolved by AMCON after due verification.
“Needless to add, the successful resuscitation of Delta Steel would act as a great catalyst for the restoration of peace and prosperity in the region, while making productive use of gas resources and iron ore reserves available in abundance,” it said.
When fully operational, Premium Steel revealed that the plant is expected to employ in excess of 1,500 employees, expanding to 5,000 over the next phases of expansion and diversification.
“Several suppliers and ancillary industries in the region are also expected to flourish upon the restoration of operations,” it added.
Premium Steel is a large-scale industry operator with international trading operations in several countries, mining operations and steel plants in Turkey.
It has other plans to invest in mining and large-scale industrial projects in Nigeria and sub-Saharan Africa in the next five years.
In addition to the acquisition of Delta Steel, Stallion Group announced yesterday that it had intensified efforts to expand its operations in Nigeria’s fully integrated rice value chain.
In a statement, it said the group’s efforts to increase local rice production commenced as early as 2007 when the associated challenges were more complex.
“Leveraging on the policy impetus provided by the federal government through its Agricultural Transformation Agenda, Stallion Group has already established a major increase in local production to 430,000 metric tonnes per annum.
“The group is targeting production of 1.50 million metric tonnes of rice production in Nigeria through setting up more milling capacities and structured farming activities,” Stallion said in the statement.
– This Day