Tata Steel Board approves acquisition of Corus Group for GBP 4.3 Billion

Tata Steel Ltd has announced that 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 GBP 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 U K 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 globalization. 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.

Source : Equity Bulls

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