Britain's GFG pledges US$1 bn after Australia's Arrium takeover

Britain's GFG Alliance has vowed to invest up to US$1.0 billion in Australian steelmaker Arrium after formalising its takeover of the cash-strapped firm Friday, even as the sector faces a global supply glut and soft demand growth.

The alliance, owned by Britain's Gupta family, in July beat a Korean consortium to buy Arrium after it went into voluntary administration last year with bad debt and plunging commodity prices.

GFG said there would be "major capital investments" across several sites, efforts to streamline the business, and more iron ore and steel exports.

It added that it was "investing up to US$1 billion across (Arrium's) Whyalla steelworks and mining businesses" and was looking to invest further in Australia, including in a new steel plant and major port and infrastructure development.

"As we now focus on our plans for investment and growth, we have every reason to be confident that this business shall increase its already significant role in supporting the construction of Australia's future," GFG executive chairman Sanjeev Gupta said in a statement.

The investment announcement came as the sector grapples with China's failure to cut down on its massive overcapacity in steel production.

The US has vowed to slap tariffs on steel imports while the European Union has taken measures against some Chinese steel products, arguing that Beijing is providing unfair subsidies to its manufacturers and is distorting the market.

Arrium operates in 15 countries with 8,350 employees, of which 7,000 are based in Australia, according to the company's website. No further details of GFG's takeover, including the bid price, were released.

Arrium owed more than Aus$2.0 billion (US$1.6 billion) before its shares were suspended, and reported a full-year loss of Aus$1.9 billion in 2014/15.