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Buying process begins

Tata Steel

acquired 199 million shares

Cost comes

to $2.4 billion (around Rs 10,490 crore).

MumbaiFeb. 1Tata Steel on Thursday set in motion the acquisition process for UK-based steel maker Corus, only a day after winning the bid for the company.

Tata Steel UK, the SPV that was formed for the Corus acquisition, has acquired 21.1 per cent of the equity share capital of the Anglo-Dutch steel maker at 608 pence per share, said the company in a notice to the stock exchanges on Thursday.

Tata Steel acquired 199 million shares, spending £1.22 billion (around Rs 10,490 crore).

Tata Steel shares dropped from Wednesday's closing price of Rs 463.95 to Rs 457.75 on Thursday, marking a drop of Rs 6.20 (1.34 per cent).

After a three-month long takeover battle, Tata Steel nudged out Brazil's CSN from the race in a closed-door eight-hour auction in London by offering a price of 608 pence, about 34 per cent more than its first offer of 455 pence a share made in October last year.

The acquisition of 21.1 per cent stake by the SPV marks the first step in the merger process. The formalities are expected to be completed within three to four months, with executive committees and task forces being set up to start the integration process.

The company plans to fund the $12.1 billion acquisition through a debt-equity ratio of 53:47, with the exposure of Tata Steel 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 been maintaining that the funding of the acquisition will not be a burden on the balance sheet of the company and that the funding was being supported by Tata Sons.

The focus of Tata Steel after the integration process will be on how to increase the competitiveness of Corus. The company has estimated that the full synergies of the merger would be realised by the third year. The synergies would be in the areas of procurement of materials, shared services and operational efficiencies.

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CSN beaten at the wire
`Corus buyout price is worthwhile'
Tata-Corus deal: Aggressive price by any yardstick

(This article was published in the Business Line print edition dated February 2, 2007)
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