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Acquisition `was a matter of pride'

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Batuk Gathani

LondonJan. 31In what is widely rated as a landmark in India's corporate history, in the early hours of this morning, Tatas finally won the crucial battle for Corus with a 6.2-billion ($12.1 billion) including debt, widely rated as the highest corporate bid by an Indian company in a foreign takeover.

The Tata group was seen assiduously competing with the Brazilian steel group CSN for acquisition of the Anglo-Dutch steel maker Corus.

Post-deal reactions

A spokesman of the company was quoted as saying, "This is far above earlier analysts and market estimates.''

A banker working on the deal said: "This is a price that Corus shareholders will be happy with but also one that Tata is happy with."

It is also revealed that the Tata group "is particularly excited" about the outcome of Corus acquisition.

According to independent analysts, Corus is rated "expensive" at 515 pence a share and rated as a "fair" value for 450 pence. However, as an analyst put it: "It was a matter of pride" for the Tata group which is seen embarking on a phase of global expansion.

Expansion fervour

Major Indian companies are currently engaged in "overseas expansion" fervour and according to latest statistics, they have acquired 1,092 foreign companies in recent months.

As an analyst put it: "India is like Japan in 1960s". The Indian companies are looking for healthy companies which have become "sick" due to management problems and their current strategy is to buy controlling interest in such companies, revamp management and turn them around into profit making ventures.

Today's deal highlights the final chapter in a successful turnaround for Corus, which was on the brink of collapse four years ago when its shares were trading at less than ten pence. The company has been restructured and turned around by its chief executive, Mr Philippe Varin.

The steel industry in North America, Europe and Asia is getting bigger and more global. Arcelor, based in Luxembourg, was world's biggest steel producer but after five months' struggle, Mr Lakshmi Mittal acquired the company and has now emerged as the world's largest steel producer. Mr Mittal is also working on a billion dollar steel project in India.

China is the world's top steel consumer with production of 328 million tonnes (mt) in 2004. It is followed by the US with 123 mt, Japan 80 mt, South Korea 47.5 mt, Germany 38.7 mt and India 38.3 mt.

Corus was ranked eighth largest steel producer in 2004. Now Tata and Mittal Steel are seen emerging as formidable global steel producers, ranking among the world's top five.

(This article was published in the Business Line print edition dated February 1, 2007)
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