The Hindu Business Line : Funding Corus buy: Tata Steel board will meet next week

The arrangements
The board will meet on April 17 to consider proposals for raising equity funds to finance its investment in the SPV
It plans to fund the acquisition through a debt-equity ratio of 53:47

Mumbai April 10 Tata Steel Ltd has said that its board would meet next week to consider proposals to fund its $12-billion acquisition of Anglo-Dutch steel-maker Corus Group Plc.

The company's board of directors will meet on April 17 to consider proposals for raising equity funds to finance its investment in the SPV (special purpose vehicle) for acquiring Corus, said Tata Steel in its announcement to the Bombay Stock Exchange on Tuesday.

Tata Steel had sealed the deal to buy Corus in January, after three months of bids and counter-bids with Brazil's CSN.

Earlier this month, Tata Steel had said that it had completed the £6.2-billion acquisition of Corus Group at a price of 608 pence per ordinary share in cash. The enlarged company would have a crude steel production of 27 million tonnes in 2007, making it the world's fifth largest steel producer.

Tata Steel UK, the SPV formed by Indian company for the acquisition, has acquired 21.9 per cent in Corus.

The company plans to fund the acquisition through a debt-equity ratio of 53:47. The exposure of Tata Steel is likely to be in the region of $4.1 billion, which will be a mix of debt and equity. The rest of the funding will be done by the SPV through various long-term loans, which would be serviced out of Corus' cash flows.

Tata Steel officials have in the past maintained that funding of the acquisition would not burden its balance sheet and that the funding would be supported by Tata Sons.

Once the integration process is through, Tata Steel's focus would be on improving the competitiveness of Corus.

The company expects that full synergies of the merger would be realised by the third year. The benefits would be in the areas of procurement of materials, shared services and operational efficiencies.

The post-acquisition entity would have 84,000 employees and a spread across four continents. Corus' top management would continue with this entity, an earlier note from Tata Steel had said.

Tata Steel shares were marginally up at Rs 495.55 on the BSE.

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