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The mud-slinging between the warring Cyrus Mistry and Ratan Tata has forced Tata Steel to justify the Corus acquisition made a decade ago and deny all other allegations made against its board members.
Denying Mistry’s statement that the acquisition of Corus Group plc was a big mistake and it was done to soothe Ratan Tata’s ego, Tata Steel in a statement dismissed the unsubstantiated allegations. The acquisition proposal was extensively deliberated in the board and the board approved the transaction, it said.
The Corus acquisition was based on the long-term strategy to pursue growth through international expansion and enhance the portfolio of value-added products, it said.
The performance of Corus post acquisition validated the strategy till the black swan event of the global financial crisis structurally impacted the underlying demand conditions in Europe, causing financial hardship to the entire industry, said the company.
Earlier, Mistry had said it is a common knowledge that the decision to acquire Corus for over $12 billion, when only a year earlier it was available at less than half that price, was based on one man’s ego and against the reservations of some board members and senior executives. The over-payment made it harder to invest in the acquired assets, which had been neglected, and thereby placed many jobs at risk.
Tata Steel was facing a potential writedown of another $10 billion, Mistry had said.
Meanwhile, B Muthuraman, former Vice-Chairman and Managing Director, Tata Steel, defended the Corus acquisition, saying it was a well thought out, long-term strategy to grow the company through capacity expansion in India and inorganic growth internationally.
Justifying the acquisition cost, Muthuraman said the value of Corus increased since the initial bid in line with the commodity price boom, its underlying performance and the transaction process. The acquisition was through a transparent auction process managed by the takeover regulator in the UK and the acquisition price was £50 million higher than the next bidder, he added.
In the first two years of the acquisition itself, he said, Corus had an average annual EBIDTA of over £1 billion, which justified the acquisition. The sudden and unprecedented scale of the global financial crisis in 2008 had a very significant adverse impact on the industry fundamentals in Europe, which also impacted Corus. Therefore, such frivolous and unconsidered comments on the acquisition should be avoided, he said.
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