Tata Offers 4.1 billion pounds for Corus
Corus Group Plc. has confirmed that it has received a bid of 4.1 billion pounds from one of India’s biggest business houses, the Tata Industries. The bid has though failed to live up to the expectations of market analysts who were eyeing a higher sum.
The Corus group is the largest steelmaker in UK which employs 41,000 people. Created in 1999 by the merger of the Dutch based Royal Hoogovens and British Steel Plc, it has been only a couple of years since the company has started making profits. It went for a reshuffle in 2003 after reporting losses for three consecutive years.
The Tata Group based in Mumbai, controls the Tata steel. Presently ranked 56th in overall production of steel it employs about 38,000 people. The group is however 138 years old and accounts for about 3% of India’s GDP. With its diverse functioning in engineering, chemicals, software and machinery it had sales of $18 billion in the fiscal year ending 31st March, 2005.
The offer includes Tata paying 455 pence per share to Corus, valuing the firm at around 4.1 billion pounds. The indicative price has certainly disappointed the markets. The shares of Corus had shot up expecting an offer of around 5.6 billion pounds or 580 per share. The shares fell to 476 pence in mid day after the announcement. The Tata steel share rose to 515.70, a gain of around 0.85%.
``The merger with Corus gives Tata Steel a foothold in Europe, while Corus gets access to cheap iron ore resources,'' said Prashant Kothari, a fund manager at Prudential ICICI Asset Management Co. in Mumbai. Prudential ICICI has $6.6 billion in assets in India, including 1.1 million Tata Steel shares.
Corus added that its formal recognition of the bid approach had been made with the consent of Tata but cautioned there could be no certainty that a bid would materialize.
A statement from Corus said: "Discussions are taking place. There can be no certainty that an offer will be made."
If the deal comes through, Tata Steel will become the sixth largest producer of steel. It will further put the developing countries in a strong position in terms of steel production. With China accounting for a sizeable portion of the pie and Arcelor Mittal is being the biggest steel producer in the world; developed world has certainly got a point to ponder over.
