Tata to takeover Corus
TATA Steel Ltd agreed on Friday a 4.3 billion pound ($8.04 billion) takeover bid for Anglo-Dutch steelmaker Corus Group, extending a consolidation wave in the fragmented steel sector.
Corus and Tata said in a joint statement they had agreed a cash offer valuing Corus at 455 pence per share.
The deal, which creates the world’s fifth-largest steelmaker, is India’s largest ever foreign takeover and follows Mittal Steel’s $31 billion acquisition of rival Arcelor this year.
"This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion," Tata Steel Chairman Ratan Tata said in a statement.
The deal, which analysts say could still face a counterbid from rival steelmakers, illustrates the drive by low-cost producers to expand their global reach and add more high-technology products.
"Together we will be even better equipped to remain at the leading edge of the fast changing steel industry," Tata said.
Corus Chairman Jim Leng said the deal helped give it access to low-cost output and high growth markets and followed talks with companies in Brazil, Russia and India.
"This combination with Tata, for Corus shareholders and employees alike, represents the right partner at the right time at the right price and on the right terms. This creates a well balanced company, strategically well placed to compete in an increasingly competitive global environment," he said.
Sources familiar with the matter said on Oct. 17 Corus’s board had given tacit approval to the bid and had given Tata access to its books to firm up the offer.
Tata said in a statement it had agreed a deal on Corus pensions, a potential stumbling block to a deal, and would pay 126 million pounds into the firm’s pension scheme.
Tata said the deal valued Corus at a multiple of about 5.4 times underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations for 2005.
Shares in Corus, which have risen more than 50 per cent this year amid persistent bid talk, fell 1.5 per cent to 471-1/4 p by 0722 GMT. Shares in Tata Steel rose 2.6 per cent to Rs 514.80.
"They wanted the company and they have got it. But we have to see how the funding happens and how the integration progresses. One distinction is that EBITDA margins for Tata’s are about 40 percent and for Corus is about 7 percent," said Sreesankar, head of research at IL&FS Investsmart, in Mumbai.
Corus, created through the merger of Dutch firm Hoogovens and British Steel in 1999, agreed in March to sell most of its aluminium assets in a deal which analysts said paved the way for the company to take part in steel consolidation.
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