Corus board approves Tata Steel's $8 bn takeover bid

Friday, 20 October 2006, 07:00 Hrs
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LONDON: Anglo-Dutch steel maker Corus Friday agreed to a $7.6-billion takeover by Tata Steel in what will be the largest overseas buyout by an Indian company to create the world's fifth-largest producer of the commodity.

In a statement early Friday, the two companies confirmed that they had agreed to a cash offer that values Corus at 455 pence per share, or a net valuation of 4.3 billion pounds ($8 billion).

The deal - which surpasses the net foreign direct investment inflows into India last fiscal of some $7 billion - will more than quadruple their sales to $23 billion.

The Anglo-Dutch company is currently ranked the ninth largest steel producer in the world with 18.2 million tonnes, while Tata is ranked 56th with five million.

The top two slots in the global steel space are currently held by Indian-owned entities - Mittal Steel and Arcelor, both of which are in the stable of London-based Lakshmi Niwas Mittal.

"This acquisition is proposed to me made by Tata Steel U.K. a wholly-owned indirect subsidiary of the company, recently incorporated in the United Kingdom for the purpose of completing the acquisition," Tata Steel said in a statement.

The multi-billion dollar offer will now be placed before Corus shareholders for approval. But industry analysts believe that the field is now open for counter-offers - most likely from steel majors in Europe, Russia and Brazil.

"The proposed acquisition represents a defining moment for Tata Steel, entirely consistent with our strategy of growth through international expansion," Ratan Tata, the chairman of Tata Sons, said, commenting on the development.

"Corus and Tata Steel are companies with long and proud histories. We also have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread," he added.

The shares of Tata Steel were up 2.45 percent at 514 on the Bombay Stock Exchange after the news of the Corus board's decision on the takeover was conveyed to the bourses.

Corus - Europe's second largest steel producer with a crude steel production of 18.2 million tons primarily - was formed in the 1990s by the merger of British Steel and the Dutch group Hoogovens. The company employs 47,300 people.

Tata's move is the latest salvo by the 138-year-old group - among the top business houses in India with 96 companies in its empire - to spread its wings across the globe in all its seven areas of operations.

The company had made two major acquisitions over the past two years worth $421 million - those of NatSteel of Singapore in February 2005 and Millennium Steel of Thailand nine months later.

"This offer from Tata Steel reflects the substantial value created for our Corus shareholders since the placing of open offer and launch of our restoring success programme in 2003," said Jim Leng, chairman of Corus.

The Corus directors had had been advised by financial advisers Credit Suisse, JPMorgan Cazenove and HSBC that the terms of the acquisition was fair and reasonable towards Corus Shareholders.

"Corus directors intend to unanimously recommend that Corus shareholders vote in favour of the scheme as they have themselves undertaken to do so in respect of their own beneficial holdings of Corus Shares," the statement added.

"This combination with Tata - for the Corus shareholders and employees alike - represents the right partner at the right time at the right price and on the right terms."

For Tata Steel, the move is in line with the company's vision to boost its annual output of 8.7 million tonnes to 15 million tonnes by 2010, and take it upwards to 30 million tonnes by 2030.

"More stunning moves on the mergers and acquisition front can definitely be expected," a company official said.

Corus primarily manufactures semi-finished and finished carbon steel products, with activities divided into three main divisions - strips, long products and distribution and building systems.

"The Tatas will definitely stand to gain as they can extend their footprint to yet another region," said Anand Rathi of the New Delhi-based corporate advisory group and securities firm Rathi and Rathi Associates.

"This shows the aspiration of the Tatas to globalise, banking on being a low-cost steel maker. This will also lead other steel firms to follow suit," said corporate and financial analyst Sanjay Bansal, who runs Ambit Finance.
Source: IANS
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