Crowning glory: Tata buys up big chunk of UK 'jewels'


Test Debutant
Dec 23, 2005
LONDON: Tata Steel announced the largest Indian takeover of a foreign company with a 4.3-billion-pound offer for Anglo-Dutch firm Corus on Friday with the mantra that the "unique" deal creating the world's fifth-biggest steel producer is a "defining moment".
Seven-year-old Corus, till now number nine on the league table of steel producers, was born of the marriage of ailing British Steel and Dutch firm Hoogovens. Its chief executive Philippe Varin and chairman Jim Lenge said the deal "represented the right partner at the right time, at the right price and on the right terms".

Tata chairman Rajan Tata said the takeover, which Corus trumpeted as "a strategically-compelling combination" would be a "defining moment" for his company, which was the world's 56th-largest steel producer last year. He said the deal was "entirely consistent with our strategy of growth through international expansion".

He said, "Corus and Tata Steel are companies with long, proud histories. Together we will be even better equipped to remain at the leading edge of the fast-changing steel industry."

For the moment, the two companies declared they would retain their own names, though Tata Steel UK will seek to delist Corus from stock exchanges in London, Amsterdam and New York after completion of the deal early next year. The new company will initially feature on the Bombay Stock Exchange, Corus sources told TOI, and there may be a move to "go forward at further accessing the capital market later".

Tata's takeover, which has been exciting the London and Amsterdam stock exchange for weeks on the back of intensive discussions going back more than a year, is seen to extend a wave of consolidation in the fragmented steel sector after Mittal Steel's multi-billion-pound acquisition of its nearest rival Arcelor earlier this year.

Industry analysts said the Indian acquisition of one of western Europe's "crown jewels of infrastructure" represented the changing of the guard on a global scale.

British prime minister Tony Blair's former Europe minister Denis MacShane, who heads the UK's all-party group of steel MPs told TOI the Tata buy-out marked "a new era of British-Indian relations based on equality of common interest".

Even as Middle England's more cynical marketing gurus suggested Tata's takeover of Corus was akin to "Mahatma Gandhi buying Lancashire cotton mills and the former British empire is now simply buying Britain up", MacShane said the new Indian presence in European markets was very welcome. It is well represented by "Mittal operating out of London, Lord Paul of Caparo and now Tata-Corus and all of this in the context of high steel demand in Asia because of fast-industrialising India and China," he added.

There was no comment from the forerunner of steel industry consolidation, Lakshmi Mittal. Just days ago, Mittal declined to answer a question from this paper about why he had not sought to buy Corus.

Sources said Mittal passed up Corus because he wanted the bigger prize, his nearest rival Arcelor, and "monopoly and competition issues" would have prevented buying both European steel producers.

Tata Steel's 455p-a-share offer for Corus, is roughly 20 pence below the current share price, but on Friday Varin took to the airwaves to explain to a baffled British market, why it was still the best deal possible. He said that intensive discussions with Russian suitors such as Severstal and Novolipetsk and the Brazilian CSN had left Corus with the strong impression that its future lay with Tata Steel.

At a video-uplinked conference uniting European capitals with Indian cities, the two companies explained that Tata would combine plants in India, where there are major iron-ore deposits, with Corus's furnaces from Britain to Norway. Sources said the merged company's proforma was expected to exceed the joint 23.5 million tonnes of 2005 and "the best fit" option was this marriage of Tata's low-cost production with Corus's sophisticated steel-making technology.

Patrick Flockhart, managing director of Steel Business Briefing said Tata-Corus would be a good fit with excellent synergies in distribution, management and R&D, while the combine would have better pricing power.

Though analysts broadly welcomed the deal, many expressed some incomprehension about Tata Steel's enthusiasm to take on a one-billion-pound debt to buy Corus, along with responsibility for 166,000 Corus pension fund members.

Sources said Tata Steel had offered the best pension protection "assurances" of any of Corus's suitors but analysts warned that if the steel sector were laid low by an economic downturn in the near future, Tata Steel might have find itself over-extended and in the red.

Tata said it would pay £126m into the Corus pension fund as part of the deal and will increase the annual contributions to the British Steel fund.

Corus, whose production facilities are located in Europe – mainly in the UK and the Netherlands – with smaller plants in Germany and France, has only recently righted itself after years of bad balance sheets, job cuts and planned plant closures. Both companies said there were no plans to relocate any Corus plants or cut jobs at the moment and a "more competitive steel producer is the best insurance against redundancies".

Corus, which employs 47,300 people worldwide, has a 24,000-strong workforce in the UK. In a sign British and European trades unions will be watching Tata-Corus like hawks, Transport and General Workers Union national secretary John Rowse slammed the "very brittle assurances on jobs".

wow ,10billion$ takeover ....This is huge news for india inc ....the biggest takeour by an indian company prior to this was 700 mn$ of daewoo elc by videocon .......this will put tata to 5th spot , with mittal already on top ..indians pretty much rule the steel sector! :19:
Steel firms Tata and ThyssenKrupp to merge

Tata Steel and ThyssenKrupp have agreed a merger which will create Europe's second-biggest steelmaker, after Arcelor Mittal.

German-owned ThyssenKrupp's supervisory board gave the go-ahead to the joint venture on Friday.

The deal will mean Indian-owned Tata Steel's UK plants are merged into a pan-European venture with annual sales of about £13bn.

These include the UK's biggest steelworks at Port Talbot in Wales.

"The joint venture with Tata Steel is an important milestone for the transformation of Thyssenkrupp to an industrials and service group and will lead to a significant improvement of the financial figures of Thyssenkrupp," the group said in a statement.
This combination will still have a tough time competing with Arcelor Mittal, which is led by the very aggressive and competent Lakshmi Mittal.
This combination will still have a tough time competing with Arcelor Mittal, which is led by the very aggressive and competent Lakshmi Mittal.

The other problems faced both companies is the aggressive and no so competent? policies of Trump in levying hefty tariffs against foreign steel.
This combination will still have a tough time competing with Arcelor Mittal, which is led by the very aggressive and competent Lakshmi Mittal.
Their real competition is with the Chinese who are producing too much steel and dumping it cheaply - some say below cost price.

With Trump's tariffs designed to limit steel imports into the USA so as to allow the (more expensive) US steel makers to be able to compete on the US domestic market, it means that the Chinese, Europeans and everyone else will be competing with each other even more for the remaining steel markets around the globe. And that can only mean one thing. More cost cutting and more dumping.

The 'jewels' are beginning to look a bit tarnished.