Tata Steel in $10.5-billion bid for Corus

By Rex Mathew
05 October 2006

In what would be biggest ever acquisition by an Indian company, Tata Steel is reportedly in negotiations to acquire Anglo-Dutch steel company Corus. The negotiations were first reported by UK-based newspaper The Independent and some of the domestic financial dailies have also carried similar reports today.

These reports have mentioned an offer price of 580 pence per share of Corus as against a closing price of 407.5 pence (up 3.89 per cent) yesterday on the London Stock Exchange. The offer would value Corus at close to $10.5 billion (£5.5 billion) and would be announced as early as this weekend, if these reports are to be believed.

Corus''s ADS prices surged 23.31 per cent yesterday on the NYSE and gained close to another per cent in after hours trading to $18.35 per ADS.

The acquisition is most likely to be a leveraged buy-out as Tata Steel does not have the financial resources to finance such a large deal. In a leveraged buy-out the acquirer raises debt by pledging future cash flows from the target company.

Corus, formed in 1999 through the merger of British Steel and Dutch company Koninklijke Hoogovens, is one of the top-10 steel manufacturers globally with manufacturing operations in the UK, The Netherlands, Germany, France, Norway and Belgium. The company also produces aluminium, besides providing technology and other services to the metal industry.

The company had reported profits of $0.8 billion on revenues of $18.4 billion (£10.1 billion) for the last financial year 2005 and employs more than 47,000 people worldwide. The company was ranked 352 in the Fortune Global 500 list of largest companies for 2006. Corus produced 19 million tonnes of steel, or 10 per cent of total European output, and 0.6 million tonnes of aluminium during calendar year 2005.