Tata -Corus: Tata Steel to buy Corus for $8.1bn
Corus Group, largest steelmaker in the UK, today agreed to a friendly takeover bid by Tata Steel in a deal that values it at pound 4.3 billion (nearly $ 8.1 billion).
Tata Steel, which had announced its indicative bid for acquisition of Corus on Tuesday, will pay 455 pence per share and 910 pence per American deppository share to Crous shareholders, the two companies said in a joint statement.
Tata Steel has set up a wholly-owned indirect subsidiary, Tata Steel UK, for completion of the acquisition.
"The proposed acquisition represents a defining moment for Tata Steel," chairman Ratan Tata said, adding the two companies "have compatible cultures of commitment to stakeholders and complementary strenghths in technology, efficiency, product mix and geograpgical spread."
Tata Steel, post-acquisition, will emerge as world’s 5th largest steel company from its current rank of 56. Corus is Europe’s second largest steel producer with revenue £9.2 billion and crude steel production of 18.2 million tonne, primarily in the UK and the Netherlands.
Corus Chairman Jim Leng said: "The 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."
The pricing of the acquisition offers a premium of approximately 26.2% to the average closing mid-market price of 360.5 pence per Corus share for the past one year ended 4 October 2006.
Tata Steel has also offered to fund upfront pound 126 million in the pension scheme of the workers and it will increase the contribution rate on the British Steel Pension Scheme from 10% to 12% till 31 March 2009.
Corus directors, who recommended the shareholders to support the Tata offer, made it clear that they would subscribe to the offer. Their combined holding is 0.1% stake.
THE RELEASE ISSUED BY CORUS TO THE LONDON STOCK EXCHANGE A SHORT WHILE AGO:
RECOMMENDED ACQUISITION of Corus Group Plc by Tata Steel UK Limited, a wholly-owned indirect subsidiary of Tata Steel The boards of Tata Steel and Corus are pleased to announce their agreement on the terms of the recommended acquisition of the entire issued and to be issued share capital of Corus at a price of 455 pence in cash for each Corus Share, valuing Corus at £4.3 billion.
Tata Steel is India’s largest private sector steel company with 2005/06 revenues of US$5.0 billion and crude steel production of 5.3 million tonnes across India and South-East Asia. It is a vertically integrated manufacturer and is one of the world’s most profitable and value creating steel companies. Tata Sons, Tata Steel and other Tata companies had combined revenues in 2005/06 of approximately US$22 billion. Tata Sons’ current investments are valued at approximately US$50 billion.
Corus is Europe’s second largest steel producer with revenues in 2005 of £9.2 billion and crude steel production of 18.2 million tonnes, primarily in the UK and the Netherlands.
The combination is strategically compelling, creating a vertically integrated global steel group:
fifth largest global steel producer with pro forma crude steel production of 23.5 million tonnes in 2005
high quality, low cost, attractive growth platform in Asia combined with a leading European steel player high value-added product mix and strong market positions in automotive, construction and packaging
a more resilient business model and a strong platform for further growth
a strong and committed combined management team
a common business culture and shared values
The price of 455 pence per Corus Share represents:
(i) on an enterprise value basis, a multiple of approximately 7.9 times underlying EBITDA from continuing operations for the twelve months to 1 July 2006 (excluding, inter alia, the non-recurring pension credit of £96 million) and a multiple of approximately 5.4 times underlying EBITDA from continuing operations for the year ended 31 December 2005; and
(ii) a premium of approximately 26.2 per cent. to the average closing mid-market price of 360.5 pence per Corus Share for the twelve months ended 4 October 2006, being the last business day prior to the announcement by Tata Steel that it was evaluating various opportunities including Corus.
Tata Steel has held constructive and satisfactory discussions with Corus’ two main UK pension schemes and has offered:
(i) to fund upfront the IAS 19 deficit on the Corus Engineering Steels Pension Scheme by paying £126 million into the scheme; and
(ii) to increase the contribution rate on the British Steel Pension Scheme from 10 per cent. to 12 per cent. until 31 March 2009.
The Acquisition will be made by Tata Steel UK, a wholly-owned indirect subsidiary of Tata Steel, and will be implemented by way of a scheme of arrangement under section 425 of the Companies Act 1985.
The Corus Directors, who have been so advised by Credit Suisse (as lead financial adviser), JPMorgan Cazenove and HSBC (as independent financial adviser for the purposes of Rule 3 of the City Code), consider the terms of the Acquisition to be fair and reasonable, so far as Corus Shareholders are concerned.
Accordingly, the Corus Directors intend to unanimously recommend that Corus Shareholders vote in favour of the Scheme as they have undertaken to do in respect of their own beneficial holdings of Corus Shares, representing approximately 0.1 per cent. of the existing share capital of Corus. In providing their advice, Credit Suisse, JPMorgan Cazenove and HSBC have taken into account the commercial assessments of the Corus Directors.
Commenting on today’s announcement, Ratan Tata, Chairman of Tata Steel, said: "This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion.
"Corus and Tata Steel are companies with long, proud histories. We have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread.
"Together we will be even better equipped to remain at the leading edge of the fast changing steel industry."
Jim Leng, Chairman of Corus, said: "This offer from Tata Steel reflects the substantial value created for Corus shareholders since the placing and open offer and launch of our "Restoring Success" programme in 2003.
"In the middle of last year, my board agreed a strategic way forward for Corus to seek access to low cost production and high growth markets. Consistent with this, the Company held talks with a number of parties from Brazil, Russia and India. This transaction represents the culmination of these talks.
"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."
Release issued by Tata Steel to the BSE a short while ago:
"The board of directors of at its meeting held on October 20, 2006, has approved acquisition of the entire issued share capital of Corus Group Plc ("Corus") (“Acquisition”), at a price of 455 pence in cash for each share valuing Corus at pound 4.3 billion.
"Corus is Europe’s second largest steel producer with revenues in 2005 of GBP 9.2 billion, and crude steel production of 18.2 million tons primarily in UK and Netherlands. Corus is primarily engaged in the manufacture of semi-finished and finished carbon steel products.
"Its activities are divided into three main divisions; strip products (including coated and uncoated strip and welded tubes, sold both as coil and sheet), long products (including sections, plates, wire rod, narrow strip and engineering steels) and the distribution and building systems division, which operates as a link between Corus’s manufacturing operation and its customers. It has a global network of sales offices and service centres.
"The acquisition is proposed to be made by Tata Steel U K, a wholly-owned indirect subsidiary of the company, recently incorporated in the United Kingdom for the purpose of completing the acquisition. The said acquisition is proposed to be effected by means of a scheme of arrangement under Section 425 of the (English) Companies Act 1985, subject to High Court of Justice in England and Wales and Corus’ shareholders approvals being obtained.
"Acquisition is proposed to be funded through its own cash resources and loans raised by the company and its subsidiary companies formed for the purpose of this acquisition.
"The acquisition of Corus by the company is consistent with the company’s stated objective of growth and globalisation. Growth at the company has been focused towards new, higher end-markets and a more sophisticated customer base. The company has identified a number of specific benefits that it sees from a combination with Corus. Enhanced scale will position the combined group as the fifth largest Steel Company in the world by production, with a meaningful presence in both Europe and Asia.
"The powerful combination of low cost upstream production in India with the high end downstream processing facilities of Corus will improve the competitiveness of the European operations of Corus significantly. The combination will also allow the cross-fertilisation of research and development capabilities in the automotive, packaging and construction sectors and there will be a transfer, from Europe to India, of technology, best practices and expertise of senior Corus management.
"In addition, the company will retain access to low cost raw materials and slab for the enlarged group, and exposure to high growth in emerging markets, whilst gaining price stability in developed markets.
"The company believes that between the two companies, there exists a high degree of cultural compatibility which would facilitate an effective integration of the businesses over time.
"The company also expects to lead the enlarged group with a combined management team. Manufacturing will be organised as to produce slabs / primary steel in low-cost facilities and produce high-end products in proximity to client bas – both Europe and India, position high-end production in proximity to the client base – in both Europe and India.
"The company expects to lead the enlarged group with a combined management team. Manufacturing will be organised so as to produce slabs / primary steel in low-cost facilities and produce high-end products in proximity to client base — both Europe and India position high-end production in proximity to the client base — in both Europe and India."
