Welspun-Gujarat Stahl enters into a definitive agreement to form a JV with Lone Star Technologies Inc. USA

Welspun-Gujarat Stahl Rohren Ltd on December 20, 2006 has announced that it has entered into a definitive agreement to form a joint venture ("Joint Venture" or "JV") with $ 1.4 bn Lone Star Technologies, Inc. (USA) ("Lone Star"), to manufacture Spiral Welded Tubular Products for Oil & Gas applications in North America. The new facility will be located in the South West USA.

Under the agreement Lone Star and Welspun Pipe Inc ("Welspun Pipe"), a 100% subsidiary of ("The Company"), would each acquire 40% and 60% stake respectively in a newly formed Company,. Welspun Lone Star Tubulars LLC ("Welspun Lone Star Tubulars"), The Joint Venture will be funded with an aggregate consideration of approximately Rs 300 crores (US$66 million) in equity and debt. Under the terms of the agreement, Welspun Lone Star Tubulars will establish a new manufacturing facility capable of producing 3,00,000 net tons of Spiral Welded pipes in the 24" to 60" (outside diameter) range best in class coating capabilities. The new facility is expected to come online by early March 2008.

"We look forward to building upon our existing relationship with Lone Star through the formation of this Joint Venture," said B K Goenka, the Company's Vice Chairman and Managing Director, "This partnership will leverage our high-quality, efficient line pipe manufacturing and submerged are weld production capabilities with Lone Star's strong brand name and extensive sales and marketing expertise, allowing us to provide a wide array of products for onshore and offshore line pipe requirements to our customers. We have already established our US presence by manufacturing pipes for the laying of the world's deepest pipeline in the Gulf of Mexico. The Joint Venture will enable us to strengthen that presence in the fast-growing US market, where demand for spiral pipe continues to increase."

The Company & Lone Star, both, expects to realize significant benefits from this transaction. With an expanded product line into spiral weld line pipe, this united States based enterprise, will provide the JV with an attractive entry point into a new market of large diameter line pipe that is experiencing strong demand. The Spiral Weld Mill allows the JV to expand its capability to serve the fast-growing North American large diameter line pipe industry. The transaction is expected to be accretive to both the Company and Lone Star's EPS in 2008-09.

The Board of Directors of the Company at its meeting held on December 20, 2006 has approved entering into joint venture agreement with Lone Star Technologies Inc. USA for setting up of Spiral Welded Pipe Mill.

Source : Equity Bulls

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