The Hindu Business Line : CSN beaten at the wire

Money matter
Funding will be guided by the 53:47 debt-equity ratio
Exposure would be $4.1 billion through a mix of debt and equity
Rest would be through loans and ring finance by special purpose vehicle

Mumbai, Jan. 31 Mr Ratan Tata and India Inc broke into the top league with Tata Steel snapping up Corus in the biggest overseas acquisition by an Indian entity.

On Tuesday night, even as India slept, Tatas kayoed Brazil's CSN to pick up Corus at 608 pence a share in an all-cash deal costing $12.1 billion (Rs 53,361 crore).

Closed-door auction

In a tight eight-hour closed-door auction in London, Tata Steel floored CSN in the ninth and last round, to become the world's fifth largest steel producer.

The bidding at the auction conducted by the Takeover Panel, UK, was a close scramble, with the Tatas trumping CSN's last offer of 603 pence by 5 pence, to end a more than three-month old takeover battle.

"Today marks the end of the journey that started quite some days ago. An Indian company is making the bid for a European steel company much larger than itself — it is something which has never happened," Mr Ratan Tata, Chairman of Tata Steel, said.

Great moment

The moment marked "a great fulfilment for all of us in India as an Indian steel company now has acquired a global scale, with a footprint in Europe. It is the commencement of Tata Steel's global strategy," Mr Tata said at a press conference to announce the good news.

Shares fall

The company shares tumbled 10.6 per cent (Rs 55.35) to Rs 463.95 on Wednesday from Monday's close of Rs 519.30. Mr Tata dubbed the market response as a "short term and harsh view. " We often damn a company when it makes loss in one year and applaud when it does good in another year. The life of a corporation is much more than a single year," Mr Tata said.

He said "we have satisfied ourselves that the acquisition of Corus has in no way jeopardised the interest of shareholders and that it will also compensate them over the next few years."

The company's funding for Corus at the new price will be guided by the 53:47 debt-equity ratio proposed at the time of the original offer of 455 pence.

Tata Steel's exposure would be $4.1 billion through a mix of debt and equity.

The rest of the funding (around $8 billion) would be through loans and ring finance by the special purpose vehicle created for the acquisition, Tata Steel UK, which would be serviced from the cash flow of Corus. The funding is also being supported by Tata Sons.

Mr B.Muthuraman, Managing Director, Tata Steel, said it would take three to four months to complete the formalities for the integration of the two companies. Executive committees and task forces are being set up to flag off the integration process.

When asked about job cuts, Mr Muthuraman said making Corus competitive will ensure that the jobs are more secured. " I don't think anybody can say his job is secured," he remarked in a lighter vein.

Chronology

The battle for Corus began in October 2006 when Tata Steel offered 455 pence per share for the Anglo-Dutch steel maker at a valuation of about $8.1 billion. After CSN entered the fray with a 475 pence offer, Tatas moved in on December 10 to clinch the deal with a revised offer of 500 pence.

But hours later the Brazilian rival barrelled in to top the Tatas offer by quoting 515 pence per share.

Tata Steel kept a teasing silence while its Brazilian rival postured confidently.

The company would have gone for a higher price had CSN not tripped at 608 pence.

"We had a cut off (price) point in mind. At this point, we would have stopped and gone back. But that point did not come," Mr Tata said.

The 608 pence offer is at a premium of about 68.7 per cent over the average closing mid-market price of 360.5 pence of Corus on the LSE for the 12 months ended October 4, 2006.

This was the last business day prior to the first expression of interest in Corus by Tatas.

More Stories on : Steel | Mergers & Acquisitions | Overseas Investments | Tata Steel Ltd

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