Essar Global plans to buy privately owned Minnesota Steel and invest $1.65 billion to build an integrated steel plant, the companies said on Wednesday, marking the Indian company's second North American steel deal this week.
Essar's unit Essar Steel Holdings on Sunday said it would buy Canadian Algoma Steel for $1.63 billion.
Minnesota Steel is planning to build a new steel mill on the Mesabi iron range in northeast Minnesota that will include ore mining, ore processing, direct reduction and steelmaking on one site.
Terms of the transaction, which is expected to close this summer, were not disclosed, Minnesota Steel Chief Executive John Elmore told Reuters. "We've come to terms for Essar to acquire Minnesota Steel," Elmore said.
Indian steel companies have been looking overseas for acquisitions as demand there and in China in particular has grown. Concern about dwindling natural resources and low transportation costs have contributed to the rapid consolidation of the steel industry.
For instance, earlier this year, India's Tata Steel agreed to buy Anglo-Dutch Corus Group for more than $12 billion after a heated takeover battle.
Minnesota Steel is controlled by the Longyear and Bennett families, who started developing Minnesota's iron ore industry together in the 1890s. Joseph Bennett, a general partner in R.M. Bennett Heirs, is the company's chairman.
Stephen Hicks, who is president of JML Heirs, a co-owner of Minnesota Steel, is vice chairman.
Elmore said that Minnesota Steel and Algoma Steel will be the foundation of Essar's North American strategy, which Essar said includes plans for further expansion.
The steel plant will have an annual capacity of 2.5 million tons when completed. Construction is expected to begin in the 3rd quarter depending on environmental and regulatory approvals.
The first phase of the plant is expected to go on stream in 2009 and produce up to 1.5 million tons of thick steel slab per year, the companies said.