INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS...

TATAS, CORUS REACH PACT FOR $9-B DEAL, FORMAL BID SOON

 TATA Steel's talks with the Corus management, ahead of its possible bid for the British steel maker, have been successful, people close to the development said. This might pave way for the Indian steel major to follow up with a formal offer valuing Corus at about $9 billion. A formal announcement is expected by the end of this month.

   “The British steel maker has positively responded to Tata Steel and is convinced about the synergy between the operations of the two companies,” sources said. The development almost puts to rest intense speculation in the British media about Russian and Brazilian companies also vying for a stake in Corus.

   The deal, slated to be the biggest in the history of India Inc, is estimated to be worth $9 billion, sources said. While Tata Steel and group holding company Tata Sons will raise almost $3.5 billion, the rest will be raised from financial institutions. A source involved with the transaction added that the Tatas may float a special purpose vehicle in Singapore for this. Standard Chartered Bank, ABN Amro and Deutsche Bank are working on raising the fund for the Tatas.

   Top officials from Tata Steel are travelling to Singapore this week for a board meeting of subsidiary company NatSteel, which was acquired in 2004. “From Singapore, they might go to London for talks with the Corus management,” sources said.

   A Corus spokesperson declined to comment, saying the company is in offer period (according to British takeover code) and will make formal announcements “in case of any developments”. A Tata Steel spokesperson said the company does not wish to comment on speculative reports from unconfirmed sources.

   Tata Steel shares rose 0.1% at Rs 511.35 on BSE on Monday.

   Tata Steel had been talking to the Corus management for some time now. It wants its bid to be perceived as friendly and is anxious to avoid the political furore that greeted Mittal Steel when it made its unsolicited bid for Arcelor in January.

   The deal, if and when it happens, will further consolidate the global steel industry and will catapult Tata Steel among the top 10 steel companies in the world. The new entity will become the sixth-largest steel manufacturer in the world with annual production of at least 23 million tonnes per annum.