Thursday, October 19, 2006
Corus backs £5bn Tata Steel bid
he board of Corus, the Anglo-Dutch steelmaker, has recommended a £5.1bn takeover for the company from India’s Tata Steel and will make a statement about this, possibly as soon as Friday, people close to the discussions told the Financial Times.
The move will throw down the gauntlet to any potential counter-bidders for the world’s eighth biggest steelmaker. Novolipetsk and Severstal, two Russian steel companies, and CSN, a Brazilian steelmaker, are thought by some steel onlookers to be interested in making a counterbid. All three companies have declined to comment.
The deal would create the world’s sixth biggest steelmaker and continue the rapid trend towards consolidation in the steel sector, illustrated by the €26.9bn takeover in June of Arcelor by Mittal Steel.
The boards of Tata Steel and Corus were expected to meet on Thursday to discuss further details of the offer, which values Corus at 455p a share. Corus shares were trading at 481¾p at midday on Thursday.
According to a person involved in the transaction, Tata Steel – part of the Tata industrial group – plans to inject about $2.5bn of its own borrowings and $1bn cash into a special purpose vehicle that would take over Corus. This unit would then raise roughly $5.5bn of debt against Corus’ cashflow.
The deal will be done through a scheme which provides a two-month window for other bidders to come forward, the person familiar with the deal said.
The financing arrangements and contracts were being finalised on Thursday. Tata had considered inviting private equity groups to share in the deal but had dropped the idea.
The timing of the deal was defensive from Tata’s point of view because many of its potential rivals were tied up with separate acquisitions, share offerings and other deals, said a person knowledgeable about the transaction.
Created in 1999 from the merger of British Steel and Hoogovens of the Netherlands, Corus is three times larger than Tata in terms of output.
But a link with Corus would help Tata diversify away from its key markets in Asia and would provide it with access to more sophisticated steel-making technology.
ABN Amro and Deutsche Bank are advising Tata on the bid and helping with the financing. Corus is being advised by Credit Suisse, HSBC and JPMorgan Cazenove.
A Tata Steel spokesman was unavailable for comment. Corus said it would not comment on whether it had decided to recommend the offer but said any decision by its board would be announced in due course.
The move will throw down the gauntlet to any potential counter-bidders for the world’s eighth biggest steelmaker. Novolipetsk and Severstal, two Russian steel companies, and CSN, a Brazilian steelmaker, are thought by some steel onlookers to be interested in making a counterbid. All three companies have declined to comment.
The deal would create the world’s sixth biggest steelmaker and continue the rapid trend towards consolidation in the steel sector, illustrated by the €26.9bn takeover in June of Arcelor by Mittal Steel.
The boards of Tata Steel and Corus were expected to meet on Thursday to discuss further details of the offer, which values Corus at 455p a share. Corus shares were trading at 481¾p at midday on Thursday.
According to a person involved in the transaction, Tata Steel – part of the Tata industrial group – plans to inject about $2.5bn of its own borrowings and $1bn cash into a special purpose vehicle that would take over Corus. This unit would then raise roughly $5.5bn of debt against Corus’ cashflow.
The deal will be done through a scheme which provides a two-month window for other bidders to come forward, the person familiar with the deal said.
The financing arrangements and contracts were being finalised on Thursday. Tata had considered inviting private equity groups to share in the deal but had dropped the idea.
The timing of the deal was defensive from Tata’s point of view because many of its potential rivals were tied up with separate acquisitions, share offerings and other deals, said a person knowledgeable about the transaction.
Created in 1999 from the merger of British Steel and Hoogovens of the Netherlands, Corus is three times larger than Tata in terms of output.
But a link with Corus would help Tata diversify away from its key markets in Asia and would provide it with access to more sophisticated steel-making technology.
ABN Amro and Deutsche Bank are advising Tata on the bid and helping with the financing. Corus is being advised by Credit Suisse, HSBC and JPMorgan Cazenove.
A Tata Steel spokesman was unavailable for comment. Corus said it would not comment on whether it had decided to recommend the offer but said any decision by its board would be announced in due course.
