Usha Martin will seek shareholder nod on November 10 for sale of its steel business to Tata Steel. The resolution will be placed as a special business before the shareholders for approval at an extraordinary general meeting.
The support of the Basant and Prashant Jhawar promoter faction — a 25 per cent shareholder in Usha Martin — which had not given consent to the deal at the company’s board meeting that approved the sale to Tata Steel, would be the key, said sources.
However, days after the agreement, the father-son duo had issued a statement saying that they were encouraged by the Tatas signing a business agreement with the current management of Usha Martin. But at the same time, they raised several questions on the utilisation of funds.
It is not clear at this point whether there would be voting for the deal, some people close to the development said.
The requisite majority for the special resolution to go through is 75 per cent of the votes.
Institutions have 10.80 per cent stake. According to the terms of the agreement with Tata Steel, if Usha Martin is unable to obtain shareholder approval, then Tata Steel will get a right for 30 days to take Usha Martin back to the shareholders for approval; if, however, Usha Martin sells the business to any other person within a period of one year from the date of non-approval, then Tata Steel will have the right of first refusal on the transaction.
The agreed purchase price is Rs 45.25 billion. The company’s EGM notice said that the condition’s precedents were expected to be completed within the long stop date which is 12 months from the date of agreement.
However, if the company’s condition precedents are not completed, Tata Steel will have the right to extend the agreement for a period of three months or can exercise a right to first refusal for a period of six months from the long stop date.
The condition precedents include approvals and consent from the government of Jharkhand and local authorities, Aditya Industrial Area Development Authority, the Competition Commission of India, lenders of the company and nod from the nominated authorities for transfer of iron ore and coal mines.
The notice also said that in case the transaction does not fructify, the break fee for the company would Rs5 billion and for Tata Steel Rs 2 billion.