Tata Group announced a whopping $7.6 billion (over Rs34,000 crore) all-cash bid for the Corus Group, an Anglo-Dutch steel company.
Satish John & Sajeda Momin
MUMBAI/ LONDON: It is India Inc’s most audacious move to date. As company after company hits the overseas acquisition trail, the $22 billion Tata Group announced a whopping $7.6 billion (over Rs34,000 crore) all-cash bid for the Corus Group, an Anglo-Dutch steel company more than three times its size.
If Lakshmi Mittal set the dovecotes aflutter by making a hostile bid for Arcelor earlier this year, the Tata gambit is likely to unleash its own storm though the Corus management is willing to play ball.
The hostility will emanate from rival steelmakers, including Russian baron Alexei Mordashov, who had come close to snatching Arcelor. The Mittal-Arcelor deal has sent shivers down the spines of smaller steelmakers, forcing them to look for acquisition targets of their own.
The Corus deal is far from consummation, for the price the Tatas have indicated - 455 pence per share - is well below the level the share was trading at on Tuesday. But if the bid succeeds, it will create the world’s fifth largest steel combine with a 25 million tonne production capacity. Arcelor Mittal is over four times as large, with 110 million tonnes.
London steel industry analyst Raju Deswani welcomed the Tata bid and said it made good sense. But he was sure the Tatas would have to raise the offer price. “It is unlikely that the Corus board would accept this price,” he said. “Tata will have to up the bid substantially, but that is what negotiations are about.”
Analysts place the eventual acceptable price in the region of 550 to 600 pence, which will take the acquisition cost to over $9 billion.
The Tata move came after a mid-July confabulation between group chairman Ratan Tata and Corus chief Jim Leng, where they talked about a broad alliance. The talks fructified on Tuesday, when Tata Steel announced its bid.
Ratan Tata has of late been goading his company chieftains to make more aggressive acquisitions abroad to make up for lost opportunities of the past. The group’s founder, Jamshetji Tata, overcame many obstacles to set up India’s first steel company over a century ago to challenge the British hegemony in steel at that time.
Ratan Tata’s Corus bid will now rank as the single most important move of the group to consolidate its presence in the global steel industry.
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