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Tatas' shopping spree: 27 in 6 years!
The board of directors of Anglo-Dutch steelmaker Corus has accepted a $7.6 billion takeover bid from Tata Steel [Get Quote], the two sides confirmed on Friday.
The deal is the largest Indian takeover of a foreign company and will create the world's fifth-largest steel group.
In 2005, Tata Steel was only the world's 56th biggest steel producer and its takeover of Corus represents its first expansion outside Asia.
"The board has recommended Tata Steel's offer. We are hopeful that the shareholders will accept it," David Jackson, director (communications) of Corus, told CNBC-TV18 news channel on Friday.
Tata Group chairman Ratan Tata also confirmed that it has agreed to acquire the European steel company at 455 pence per share, putting the enterprise value of Corus at about $10 billion.
"This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion," Tata said.
Jackson said the deal comes at the "right time and at the right price" and expressed hope that shareholders as well as trade unions would respond positively to the offer.
Ratan Tata, who is also chairman of Tata Steel, was quoted in an AFX report as saying that the two companies have compatible cultures of commitment to stakeholders and complimentary strengths in technology, efficiency, product mix and geographical spread.
As per the agreement, 75 per cent of Corus shareholders would have to tender their shares for the acquisition to be complete.
When complete, this would be the largest takeover by an Indian company overseas. The deal would also catapult the combined entity to among the world's largest steel companies with a total capacity of about 24 million tonnes per year.
B Muthuraman, managing director of Tata Steel, said in a press meet in London that the new, combined entity of Tata Steel-Corus would have a capacity of 40 million tonne by 2011-12.
"The combined entity will have a turnover of $32 billion by 2011-12 with an EBIDTA margin of 25%," Muthuraman said.
He also discussed the six-pronged strategy outlined by Tata Steel in 2003 where the target was to increase capacity from 4 million tonne then to 30 million tonne by 2015.
Muthuraman was addressing the media in a meet attended by Tata Group chief Ratan Tata along with the top management team of Corus CEO Phillipe Varin and chairman Jim Leng. Ratan Tata said the"offer" was the right offer, and was it was not "appropriate" to say anything more on the issue.
Kaushik Chatterjee, VP (Finance) of Tata Steel, said the transaction has been based on an enterprise value of $10.26 billion. Out of this Tata Steel will fund $3.5 billion, and the remaining would be raised through the SPV floated for the purpose.
Muthuraman said that there will be no change in Corus management. "We are not going to stop with here. Corus will complete its own plans, and there will be no change in Corus managment," Muthuraman said.
He added that an integration committee will be put in place, and the buy will open new markets for the company.
Tata-Corus among top 5 deals
The $8 billion Tata Steel-Corus deal would be at No 5 among the top deals witnessed by the steel industry over the last couple of years.
The table is topped by the Arcelor-Mittal Steel deal of $32 billion followed by the NKK Corp-Kawasaki Steel deal of $14.1 billion.
All about Corus
The London-based Corus Group is one of the world's largest producers of steel and aluminium. Corus was formed in 1999 following the merger of Dutch group Koninklijke Hoogovens N.V. with the UK's British Steel Plc on October 6, 1999. It employs 47,300 people worldwide and 24,000 people in the United Kingdom.
It is listed on the London Stock Exchange, Euronext Amsterdam and the New York Stock Exchange.
Corus has four divisions: strip products division, long products division, distribution and building systems division, and aluminium division. Corus has an annual turnover of $18 billion.
After the Arcelor-Mittal Steel merger, the buzz was that Corus too would soon be a part of the next round of consolidation in the global steel industry, and likely partners could include, among others, Tata Steel.
On October 5 2006, Tata Steel announced that it was looking at various acquisition opportunities, including Corus Group. The announcement was followed by another on October 17, 2006 stating that Tata was is in discussions with the Board and Management of Corus Group and that it has made an indicative non-binding offer to acquire 100 per cent equity in Corus Group at 455 pence per share.
The Corus shares have risen in recent months on speculation the Anglo-Dutch group could face a takeover following the recent creation of Arcelor Mittal.
Tata Steel produced more than five million tonnes in the year ending March 2006 and aims to reach 7.5 million tones by 2008. It has $3.8 billion in annual turnover.
Additional Inputs: Business Standard
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