India’s Tata Steel landed the winning blow yesterday in the auction of former British Steel company Corus.
Tata offered 608p a share, valuing Corus at #5.75 billion, after going head to head with Brazil’s CSN in a late-night process run by the Takeover Panel.
The battle with CSN, which dated back to December, added a third to the price offered by Tata when it unveiled its original deal with the Anglo-Dutch firm in October.
It is the largest ever overseas takeover by an Indian firm. The deal will create the world’s fifth largest steel group, capable of producing about 24 million tonnes of steel a year.
CSN bowed out of the auction after offering 603p a share.
Prior to the start, at 4.30pm on Tuesday, CSN held the recommendation of the Corus board with a previous offer valued at 515p a share, or #4.9 billion.
Last year, Corus was the ninth largest steel producer in the world with 18.2 million tonnes of output. It banked pre-tax profits of #580 million on turnover of #10.14 billion, although lower selling prices and higher costs hit operations in the first half of this year.
Corus, which was set up through the merger of British Steel and Dutch rival Hoogovens in 1999, employs 47,300 people worldwide including 24,000 in the UK at sites including Scunthorpe, Rotherham and Port Talbot.
Its sites in the West Midlands, including a strip steel operation at Halesowen, employing about 2,000 people.
CSN and Tata had both said their takeovers would have no immediate impact on jobs.
Corus has been looking to link up with a low-cost rival as rising raw material and energy costs in the UK and the Netherlands chipped away at profits. Last year Tata Steel, part of the Indian conglomerate Tata Group, was ranked 56th in the list of steel makers around the world with output of 5.3 million tonnes.
Tata Steel is part of a group which has operations in more than 54 countries across six continents.
Tata’s steel arm was set up in 1907 and is now India’s biggest private sector steel firm.
The company claims to be among the lowest-cost steel makers in the world and its products are targeted at the automotive and construction industries.
Community, the trade union which represents steel workers, said it would be seeking urgent talks with Tata to discuss its investment strategy for Corus.
General secretary Michael Leahy said the Indian steel producer was inheriting a profitable, well-run company with some of the most efficient steel workers in the world.
"We are willing to work in partnership to drive forward an investment strategy which allows the UK operations to contribute further to the profitability of Tata.
"However, what we are not prepared to accept is the accelerated or slow demise of the UK steel industry.
"Tata should be under no illusions that we will resist any attempt to achieve this using all the resources at our disposal.
"We believe that the current Corus UK operations are of vital strategic importance to the UK economy and that large parts of our manufacturing industry are only viable because of it.
"We would expect the Government to add its voice and support to ensure continued investment in the UK steel industry."
The proposed deal, which still needs to be backed by shareholders, resulted in the company’s share price rising by another seven per cent, or 41p, to 604p in early trading yesterday.
The stock was changing hands at 200p less than that two years ago.
Martin Slaney, head of spread betting at GFT Global Markets, said: "This is obviously a dream result for Corus shareholders.
"There is ansolutely no reason at the moment as things stand why this offer should not be accepted.
"This auction process, organised by the Takeover Panel in a rare attempt to bring the bid battle to an end, seems to have played right into Corus shareholders’ hands.
"The final price tag represents a very healthy 33 per cent increase over the original 455p offer from Tata back in October.
"The consensus view among most analysts and industry experts seems to be that Tata have probably overpaid, but if further consolidation in this sector occurs going forward – which seems very likely – then this will look like very fair value to create the world’s fifth-largest steel maker."
Tata Steel will safeguard all the existing contractual and statutory employment and pension rights of all directors and employees of Corus Group upon completion of the acquisition
Tata Steel has offered to pay up front the deficit on the Corus Engineering Steels Pension Scheme and to increase the contribution rate on the British Steel Pension Scheme from ten to 12 per cent until March 31, 2009
Tata Steel chairman Ratan Tata will be chairman of the new board of Corus to be formed after the takeover
Tata Steel will not change any principal locations of Corus group's business, and will continue to be headquartered in India