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Tatas …takeover battle

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Tatas pip CSN to win Corus takeover battle

The Tatas on Wednesday pipped Brazil’s CSN to acquire Anglo-Dutch steelmaker Corus Group Plc at slightly more than $11 billion.
With a bid of 608 pence a share, Indian corporate giant Tata Steel outsmarted CSN’s 603 pence a share offer during the night-long auction process.
Brazil’s CSN pulled out of race after raising its bid to 603 pence a share.
CSN officials confirmed pulling out of the race to acquire Europe’s second-largest steel firm after a final offer of 603 pence a share. Tata officials remained tightlipped.
Tata Steel raised its final offer to 608 pence a share by the time the auction entered the concluding ninth round from 500 pence a share at the start of the auction.
· The Tata-Corus Saga: Coverage
Announcing the auction outcome, the UK Takeover Panel said Tata Steel bid 608 pence a share in cash as against CSN’s 603 pence a share.
“This auction procedure has now completed,” the Panel said in an e-mailed statement.
Tata Steel’s winning bid of $11.3 billion puts Corus Group’s enterprise value, which includes debt, at more than $13 billion.
The takeover marks the largest acquisition by an Indian company and would propel the combined entity led by Tata Steel to the fifth rank in steel output in the world.The nine-round auction called by the UK Takeover Panel began at 2200 hrs Indian time (1630 hrs GMT) on Tuesday.
Tata Steel had initially bid $9.2 billion (4.6 billion pounds) against CSN’s higher $9.6 billion (4.9 billion pounds) last month, prompting the UK Takeover Panel to intervene and pick the winner through open bidding.
Under the auction norms, each suitor was required to raise bids by a minimum of five pence per share.
With this win, Tata Steel has now entered the big league of the global steel industry. Tata-Corus would have a combined production of more than 23 million tonnes.
Currently, Arcelor-Mittal is the world’s largest company in this space, followed by Japan’s Nippon Steel and South Korea’s Posco.
The Corus acquisition would also help Tata Steel to be a 40 million tonne per year entity by 2012.

Corus is a moment of fulfillment for India: Ratan Tata

MUMBAI: Exuberant after a thriller deal to acquire Anglo-Dutch steel giant Corus for 11.3 billion dollars, Tata Group chief Ratan Tata on Wednesday dubbed the victory as “a moment of fulfillment for India.”

“This will prove to be a visionary move…,” Tata told reporters within hours of Tata Steel making a winning bid of 608 pence a share for Corus to trump Brazilian CSN that would elevate the group company to the world’s fifth largest steel entity.

At the same time, he took a dig at critics, saying: “When we launched the bid for Corus, many thought it was an audacious move, because an Indian company taking over an European company much larger in size has not happened before.”
Tata Steel would become a global scale player with footprint in Europe to become “the fifth largest steelmaker in the world,” while announcing that the present management would be retained and Corus would be integrated with Tata Steel.

This has demonstrated that India Inc can step outside of India in the international market as a global player, he said.

“I have always believed that if you want to become a global company, you have to dismiss your notion of being a single nationality,” Tata said.

On Tata Steel share prices taking a hit on Wednesday, Ratan Tata said the market was “taking both a short-term and a harsh view. We often damn a company when it makes loss in a year…hopefully in future it (market) will look back and say it (acquisition) was a right move.”

Tata Steel Managing Director B Muthuraman termed the acquisition as part of the company’s strategic planning, saying it planned for greenfield capacity where raw materials were available, while looking for acquisitions where there was market like it did in taking over NatSteel and Millennium in Singapore and Thailand, respectively.

He agreed that nine times the EBIDTA margin quoted by Tata for Corus was a bit higher by industry standards, but the company would benefit from significant synergies although it would take three years to fructify.

The company was looking at a synergy of 300-350 million dollars a year, he added.

World’s top 10 steel producers

World crude steel output reached 1,239.5 million tonnes in 2006. This is an increase of 8.8 per cent compared with 2005. The top 10 steelmakers, ranked by output in millions of tonnes in 2005, were as follows:

1 Mittal Steel (Netherlands) 63.0

2 Arcelor (Luxembourg) 46.7

3 Nippon Steel (Japan) 32.0

4 Posco (South Korea) 30.5 v 5 JFE Steel (Japan) 29.9

6 Shanghai Baosteel (China) 22.7

7 US Steel (USA) 19.3

8 Nucor (USA) 18.4

9 Corus (UK) 18.2

10 Riva (Italy) 17.5

Source: International Iron and Steel Institute

Chronology: Corus-takeover

Jan 30 – Tata Steel is expected to raise its offer for Corus Group Plc on Tuesday to try to trump Brazil’s CSN, sparking an auction for the Anglo-Dutch steelmaker, sources familiar with the matter said.

Here is a chronology of key events in the battle to acquire Corus:

Oct 17, 2006 – Tata Steel proposes a 4.1 billion pound ($7.6 billion) takeover of Corus at 455 pence a share in cash.

Oct 20 – Corus board approves Tata bid.

Nov 17 – Brazil’s Companhia Siderurgica Nacional (CSN) unveils a proposal to pay 475 pence per share for Corus, topping Tata’s 455 pence agreed offer.

Nov 27 – Corus adjourns extraordinary shareholders’ meeting from Dec. 4 to Dec. 20 to allow CSN more time to consider a counterbid.

Dec 10 – Tata Steel raises bid to an agreed 4.7 billion pounds ($9.2 billion) at 500 pence per Corus share; Corus board recommends revised offer to shareholders.

Dec 11 – CSN says it has agreed to buy Corus for 4.9 billion pounds ($9.6 billion) at 515 pence a share in cash.

Nov 27 – Corus adjourns extraordinary shareholders’ meeting from Dec. 4 to Dec. 20 to allow CSN more time to consider a counterbid.

Dec 10 – Tata Steel raises bid to an agreed 4.7 billion pounds ($9.2 billion) at 500 pence per Corus share; Corus board recommends revised offer to shareholders.

Dec 11 – CSN says it has agreed to buy Corus for 4.9 billion pounds ($9.6 billion) at 515 pence a share in cash.

The Tata-Corus saga

January 30, 2007
Tatas enter auction ring for Corus

Indian corporate giant Tata Steel and Brazil’s CSN on Tuesday entered the auction ring for the prized trophy — Anglo Dutch steelmaker Corus group — amid reports the bid could go as high as $11 billion.
Tata Steel board meets ahead of Corus auction
The board of Tata Steel, which will enter an open bidding war with Brazil’s CSN for Corus on Tuesday, met in Mumbai presumably to discuss the strategy for the auction and also consider the quarterly results.

January 29, 2007
Loser in Corus auction can retry: Experts
While the winner of the takeover battle between India’s Tata Steel and Brazil’s CSN for Corus will be finalised by February 1, the losing side can make another attempt to acquire the Anglo-Dutch steelmaker even after the end of auction process.

Tata, CSN battle set for grand finale
The battle royale for Corus is set for a grand finale beginning on Tuesday when the Anglo-Dutch steel maker comes under the hammer and whoever between Tata and CSN bids the highest would walk away with the deal.

Tatas bet big on Corus, expansion
It’s not just Corus. Tata Steel will have to brace up for one more battle back home — sourcing iron ore for its ambitious expansion plans. But a successful acquisition of the Anglo-Dutch steelmaker will not spoil the company’s domestic expansion plans.

January 27, 2007
Battle for Corus to be settled by auction
With no final offers forthcoming from Tata Steel and CSN — the two suitors for Corus — the UK Takeover Panel has decided to put the Anglo-Dutch steel maker under the hammer on January 30.
It’ll be a long chase for Corus: Aditya Mittal
The World Economic Forum kicked off in Davos on Wednesday. Head honchos from India Inc as well as foreign entrepreneurs participated in the event.

January 25, 2007
Corus CEO to quit if CSN wins

Even as the fate of bidding war between India’s Tata Steel and Brazil’s CSN hangs in balance for Corus, reports on Thursday said that the chief executive of the Anglo-Dutch steelmaker Philipe Varin would leave if it is bought by the Latin American firm.

January 24, 2007
UK panel starts talks with Tata, CSN

The UK Takeover Panel has initiated discussions with the two suitors for Anglo-Dutch steelmaker Corus Group — Tata Steel and CSN of Brazil — to lay down the process for selecting the winner.

January 23, 2007
Tata to stall new offer for Corus

Tata Steel, which is bidding for steel maker Corus, is close to sweetening its offer for the Anglo-Dutch company, but could wait until the deadline set by regulators next week before tabling a new offer, The Times reported on Tuesday.

January 19, 2007
Corus shares jump on new bid rumours; Tata Steel down

Shares of Corus Group Plc, surged by 1.12 per cent in trading on Friday on reports that Tata Steel may revise its takeover offer, but stocks of the Indian company fell 1.67 per cent on the bourses.

January 11, 2007
CSN’s Corus play faces EU anti-trust probe

The shadow of the European Commission’s anti-trust proceedings is hanging over Companhia Siderurgica Nacional’s bid for Anglo-Dutch steelmaker Corus.

January 02, 2007
3rd bidder for Corus? It’s possible

While the fight between Tata Steel and CSN over Anglo-Dutch steel maker Corus continues, experts feel there is still time for a third suitor to put in bids ahead of a deadline set by the regulators.

December 31, 2006
Corus deal set to make many millionaires

Corus shares bought by the company’s employees for as low as 3.5 pence in 2002 may just be the reason why they would shed their black and red factory dress for Armani business suits in 2007.

December 22, 2006
Corus: Tata gets European Commission nod

The European Commission on Friday approved Tata Steel’s proposed acquisition of Anglo-Dutch steelmaker Corus.

December 19, 2006
Revised offer for Corus by Jan 30

The UK takeover panel on Tuesday set a January 30 deadline for warring Tatas and Brazilian steel maker CSN to end the competitive bidding to acquire Corus Group, failing which the issue would be decided by auction.
UK Takeover Panel mulls auction for Corus
In a rare development, the UK Takeover Panel is putting the Corus deal on the fast track by planning to auction Anglo-Dutch steel company Corus to the two rival suitors, Tata Steel and Brazil’s Companhia Siderurgica Nacional.

December 18, 2006
UK panel mulls auction for Corus

The battle for Anglo-Dutch steelmaker Corus is set to intensify with the UK takeover panel mulling over a rare intervention by arranging an auction between the two bidders – India’s Tata Steel and Brazil’s CSN.

December 16, 2006
Corus fined 3 million pounds for fatal blast

Anglo-Dutch steel company Corus, currently in the midst of a takeover bid by India’s Tata Steel and Brazil’s CSN, has been fined more than three million pounds for breaching health and safety laws at a factory where an explosion killed three workers five years ago.

December 15, 2006
Tata Steel shares up on buzz of dropping Corus bid

After a battering of two-and-a-half months, shares of Tata Steel staged a partial recovery with a gain of over 5 per cent with some market players speculating that the company might withdraw its bid to acquire Anglo-Dutch steelmaker Corus.
CSN, associates scale up holding in Corus to 23%
Even as Tata Steel mulls over its next move in the race for Corus Group, its rival suitor Companhia Siderurgica Nacional, along with bankers and brokers allied to it, has scaled up their holding in the Anglo-Dutch steel company to a little less than 23 per cent.

December 14, 2006
Rival bids: It’s not just Corus!

Corus may have emerged as the steel industry’s most sought after belle, with Tata Steel and CSN vying to be its knight in shining armour — but there were as many as 75 other companies who were courted by two or more suitors this year alone.
Corus: Rising bids raise fear of Winner’s Curse
The rising heat in the race between Tata Steel and Brazil’s CSN to acquire Anglo-Dutch steelmaker Corus has raised the spectre of the Winner’s Curse, the financial theory that the winning participant in a frenzied auction will typically pay an overvalued price.
CSN has $12 bn kitty for Corus
Two days after cornering its rival suitor Tata Steel in the race for Anglo-Dutch steelmaker Corus Group, Brazil’s Companhia Siderurgica Nacional on Wednesday said it could raise its offer further.

December 13, 2006
Tata likely to fight back on Corus

Tata Steel has recovered fast from the punch delivered by Brazil’s Companhia Siderurgica Nacional on Monday. The company is busy formulating a strategy to improve the offer for Anglo Dutch steelmaker Corus, a day after CSN outbid it.

December 11, 2006
CSN betters Tata offer, bids $9.5 billion for Corus

The battle for acquisition of Corus Group intensified with Brazil’s CSN announcing a counter offer of $9.5 billion pounds, within hours of India’s Tata Steel raising its initial offer to $9.2 billion for the Anglo-Dutch steel maker.

November 25, 2006
Brazilians may derail Tata’s Corus plan

Tata Steel’s chances of acquiring Anglo-Dutch steel giant Corus Group have suffered a jolt with bankers and brokers allied to Brazil’s Companhia Siderurgica Nacional scaling up their combined stake in the company to over 19 per cent.

November 24, 2006
UBS, Goldman Sachs pick up 11% in Corus

Global financial services firms UBS AG and Goldman Sachs Group Inc have acquired over 11 per cent stake in the Anglo-Dutch steel major Corus, which is in the middle of a takeover battle.
CSN to make a formal bid for Corus before Dec 4
Brazilian steel firm Companhia Siderurgica Nacional wants to make a rival bid for Corus before the Anglo-Dutch group’s shareholders meet on December 4 to consider an offer from India’s Tata Steel, a report said.

November 22, 2006
Corus deal: CSN ready for price game with Tatas

The battle for control of Anglo-Dutch steel company Corus Group may turn fierce, with Brazil’s Companhia Siderurgica Nacional (CSN) indicating that it will engage in a price war with Tata Steel if the situation so demands.

November 20, 2006
Tatas to go into huddle over CSN’s bid for Corus

The Tata Steel board will meet shortly to take stock of the situation arising out of Brazilian steel-maker Companhia Siderurgica Nacional’s move to buy Anglo-Dutch steel company Corus Group with a counter bid higher than Tata Steel’s offer.

November 18, 2006
Tatas game for Corus battle as CSN bids

Tata Steel is set to revise its offer for the Corus group that will exceed Brazil’s Companhia Siderurgica Nacional’s takeover bid of �4.75 a share for the Anglo-Dutch steelmaker.

October 20, 2006
Corus accepts takeover bid by Tata Steel

The board of directors of Anglo-Dutch steelmaker Corus has accepted a $7.6 billion takeover bid from Tata Steel, the two sides confirmed on Friday.

October 6, 2006
Tatas are out to conquer the world

Think of India, steel and consolidation and only one name springs to mind–that of metal maharajah Lakshmi Mittal.

October 05, 2006
Tatas plan India’s biggest acquisition

Tata Steel, the country’s largest private steel company, is in advanced negotiations with the Anglo-Dutch steel giant, Corus Group, for a possible takeover.

‘Markets are taking a short-term view’

At the age of 69, Tata Sons Chairman Rata Tata, a licensed pilot, still occasionally flies the company plane. In the auction for Corus Group, Tata displayed similar flamboyance by quoting a price as much as 34 per cent higher than what he had first quoted.

In the process, he also dispelled age-old notions that the group may be too cautious to win such a battle. His high energy level was evident today as, having stayed up all night for the auction, he still went through a hectic schedule of press conference and interviews with customary poise. He shares with Kausik Datta and Suveen Sinha his views on a range of issues. Excerpts:

Indian companies have of late been making a large number of acquisitions overseas. What are the issues that they face in such endeavours?

I have always believed that if you really want to be a global company, you have to dismiss your notions of a single nationality and treat yourself as a truly global company operating in global markets having operations in different geographies.

In fact, you should have the look and feel of a local company in that geography. When we undertake to acquire a company, we spend a lot of time prior to that convincing ourselves that the cultures of the two companies are similar, because nothing can be more destructive than to have conflicting cultures.

Therefore, in most of our acquisitions, you will find that the management of the company we have acquired, or bought into, remains with the company and over time integrates itself with the Tata Group. It is true about Tetley, Daewoo Motors and many others that we have acquired. So there are challenges with different nationalities and with different work systems but by and large it has worked reasonably well.

As one of the senior-most businessmen in the country, what would be your advice to other companies, your colleagues in India Inc, as they aspire to clinch overseas acquisitions, especially big ones like the one you have just clinched?

When we made our first bid to acquire the company (Corus), many thought it was an audacious move … an Indian company making a bid for a European company much larger in size. I believe that this will be the first step in ensuring that the Indian industry can in fact go outside the shores of India in an international market place and, in fact, acquaint itself as a global player.

Why was Corus so important to you? In spite of stating repeatedly that you would be realistic about the price, you are paying one that is seen as high by many, including the stock market. What would you tell the stakeholders?

The acquisition of Corus was a very important strategic decision, but not a do-or-die one. It was not a decision based on making Tata Steel a much larger company, but an important strategic move. Corus is a unique opportunity for Tata Steel in terms of the scale, its location and its culture.

Tata Steel saw a strategic fit with Corus in the UK and the Netherlands, which would give it a global reach in Europe and synergies with low-cost intermediates in India.

Coming to the auction, which started last night and went through the night, we were able to win the auction away from the Brazilian company and Corus has been happily acquired by an Indian steel company.

I think it’s a moment of great fulfillment for all of us in India because Tata Steel, as an Indian steel company, now has global scale with a footprint in Europe. I think it is the commencement of Tata Steel’s global strategy. It also elevates Tata Steel to the fifth largest steel company in the world.

We have satisfied ourselves that the company has in no way jeopardised the interests of the shareholders by this acquisition and I believe that over the next few years we will all come to think that this was a visionary move and the long-term repercussions will be very-very positive for India and Tata Steel.

The cultural fit, as you say, is critical. In that sense, the real work for you begins now. What do you see as your immediate agenda?

We have been talking to Corus for over a year now and believe that there exists a cultural fit. Both Tata Steel and Corus have work practices that are very similar and this cultural fit between Tata Steel and Corus is of fundamental importance to any post acquisition, integration process. We are putting in place an integration committee which will look at aligning the two companies and realising the synergies.

What about the management of the combined entity? Surely, even though Corus management stays, changes must be in the offing.

The CEO of Corus will remain the CEO of Corus. As we integrate the two companies, we will work with Mr Muthuraman (Tata Steel managing director) in terms of applying the synergies that we hope to apply.

The top management of Corus will remain with the company and therefore will be part of our integrated operations and this in itself is an expression of faith and confidence that the existing management has in the management and the ownership of Tata Steel. So I look forward to a very worthwhile unison between our two companies.

The stock market has given a thumbs down to the Corus acquisition. Is the market taking a short-term view?

The market is both taking a short-term view and a harsh view. We often damn a company when it makes a loss in a single year. We applaud a company when it makes an extraordinary profit. But the life of a corporation is much longer than a single year.

It will take several years for us to build a 19 million tonne enterprise from scratch, leave alone establishing it in Europe with a brand name. If you look at the consolidated company together, the synergy will be quite substantial. It will also be part of a global strategy that Tata Steel has and is yet to unfurl. Hopefully, in future, it (the market) will look back and say it (the acquisition) was the right move.

Finally, Tata Steel agreed to pay 608 pence a share, or marginally over $11 billion for this acquisition. Ths is far more than its first bid of 455 pence a share. How do you justify paying this amount?

Investors came in and increased the price. We have to pay for getting the company. As a prudent management, we had taken a view that we would not go beyond a point. We did not reach that point. Had we reached, we would have walked away. Overbidding or not is subjective when it comes to a judgement call.

Written by Bhushan Kulkarni

January 31, 2007 at 10:14 am

Posted in Management

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