Financial Daily from THE HINDU group of publications
Thursday, Mar 16, 2006
Financial Daily from THE HINDU group of publications Thursday, Mar 16, 2006 |
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Steel Corporate - Mergers & Acquisitions Tata Steel eyes 79% in Highveld Steel of SA Jayanta Mallick
Hat in the ring Tata Steel is likely to be pitted against Mittal Steel South Africa for Highveld. Xstrata, a local company, too is keen to buy Highveld.
Kolkata , March 15 Tata Steel is understood to have decided to place a bid for 79 per cent controlling stake in the South African Highveld Steel and Vanadium Corporation, which has been put up for sale in October 2005 by Anglo American, the controlling stakeholder. A highly placed company source confirmed that Tata Steel has begun a due diligence for the South African steel company. Meanwhile, in a statement early this month Anglo American said: "Several interested parties have commenced due diligence investigations in respect of Highveld. Shareholders are advised to continue to exercise caution when dealing in Highveld shares." The Nasdaq-listed Highveld stock's latest price (7 pm IST on Wednesday) was at $13.74. Based on this price, the market capitalisation of the stock works out to around $1.35 billion. Industry analysts have already put a price tag of between rand 6 billion (around $923.07 million) and rand 10 billion. Highveld is South Africa's second largest steel maker after Mittal South Africa and the world's top supplier of vanadium, used in the production of special and alloy steel. Tata Steel has been talking to Anglo American about Highveld Steel. Tata Steel is likely to be pitted against Mittal Steel South Africa for Highveld, an international steel stock analyst said. Mittal Steel's 52 per cent-owned Mittal Steel South Africa has recently said it was taking part in the bid process, indicating start of a due diligence probe. Mittals took over Iscor of South Africa a few years ago and wanted to consolidate the South African steel sector by buying into Highveld. A consortium led by Kermas South Africa, the South African Arm of UK-based Kermas group, is also bidding, industry sources said. Earlier, the Tata Sons Chairman, Mr Ratan Tata, had said that the group "expressed an interest in the property", but was concerned about the high levels of vanadium output, as the acquisition of vanadium-producing assets is not part of Tata Steel's plans. He had also suggested that high vanadium price level might add extra premium for the company's valuation. This concern had cropped up previously as, shortly after Anglo American's restructuring announcement, analysts were suggesting that the firm could be split `on paper'. Mittal Steel is already the dominant steel producer in South Africa and it is unclear as to how the competition authorities in South Africa would view such an approach. Another local company also reportedly interested in the deal is Xstrata, but it too may have competition challenges, given its strong position in vanadium.
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