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Last updated: November 16, 2012 8:35 pm
Lakshmi Mittal has made his first substantial industrial investment in the UK through a £272m deal to acquire a series of cement and aggregates plants, in what amounts to a big bet that the depressed economy will make a strong recovery.
The venture by Mr Mittal’s private investment business – which is run separately from his ArcelorMittal steel company – marks the first time the Indian billionaire has made a big move into the construction sector.
Mittal Investments said the Mittal family wanted to buy the industrial units because of its “confidence in the future growth of the UK economy and more specifically the construction sector”.
The deal was hailed by Sir John Parker, chairman of Anglo American, the UK mining group that is one of two companies that sold Mr Mittal the assets, as a “vote of confidence” by the steel tycoon in the UK economy.
“The move by Mr Mittal shows that he sees a strong future for construction even if it has been hard hit by the recent economic difficulties,” Sir John said.
Mr Mittal is a long-time London resident but ArcelorMittal – the world’s biggest steelmaker where he is chairman and chief executive and has a 41 per cent stake – has no industrial operations in Britain.
The steel magnate is Britain’s richest man with a fortune estimated by Forbes magazine of $16bn, some of which is tied up in the interests of Mittal Investments.
The construction materials units are being sold to Mr Mittal’s company by Lafarge of France and Anglo American, as part of a series of disposals related to an agreement announced in early 2011 to pool the two companies’ construction materials assets in the UK.
The Competition Commission in May said Anglo American and Lafarge would need to sell various plants and quarries if they wanted to get regulatory clearance for the deal.
The centrepiece of the deal is the acquisition of a cement plant in Hope, Derbyshire, that is part of the Peak District, one of Britain’s most scenic areas. The factory employs 170 people, while other assets that Mittal Investments is acquiring as part of the deal have a workforce of about 600. Other assets being bought by Mr Mittal in the venture include a network of 172 ready-mix concrete plants and five aggregates quarries.
Mittal Investments has not previously invested in the construction sector, with its other interests mainly in the field of oil and other parts of the energy business, with operations in regions such as Asia.
Mr Mittal will now control cement production that accounted in 2010 for about 16 per cent of the total British demand for the material that year of some 9m tonnes.
The cement industry has been hit by the marked weakness of the UK construction sector, among the businesses most severely affected by the country’s long period of economic weakness.
Noble Francis, economic director at the Construction Products Association, an industry trade association, said the construction industry was unlikely to recover for at least the next 12-18 months. However as a result of the depressed nature of the sector, the Indian magnate was buying the assets “at a good price”.
This article has been altered since publication to reflect the fact that Mr Mittal’s fortune is estimated to be $16bn, not $12bn as originally stated.
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