Tata Steel loses out in Vietnam takeover battle

Tata Steel has lost the bidding battle for Vietnam's Vinausteel and SSE Steel after losing a vote on the resolution for its sale and purchase agreement by Vietnam Industrial Investments (VII), the parent company of the two steel makers.

VII informed the Australian Securities Exchange "� the company is listed on the Australian stock exchange "� that the resolution on the sale and purchase agreement was lost on a poll vote by shareholders at its annual meeting on June 29.

Tata Steel's Singapore subsidiary NatSteel was to acquire 100 per cent in SSE Steel and 70 per cent in Vinausteel. The transactions were to be completed by June.

SSE Steel has a capacity of 250,000 tonnes of bar and wire rods and Vinausteel produces 180,000 tonnes of reinforcing bars.

The deal ran into problems when Prudential Vietnam Securities Investment Fund Management Company and VII Managing Director Henry Lam Van Hung, who holds 10.46 per cent, made an unsolicited cash takeover offer.

Prudential's offer of $13.3 million was 10.65 per cent higher than NatSteel's. With the vote rejecting NatSteel's offer, VII's independent directors will propose an amended offer for $17.6 million from Prudential.

With this, the agreement between VII and Natsteel, which had bid for Vinausteel and SSE Steel in March, stands terminated.

This runs contrary to NatSteel's contention that not completing the sale and purchase agreement would be a breach of contract. Subsequently, VII's independent directors had recommended that shareholders vote on NatSteel's sale and purchase agreement and not that of its rival suitor, Prudential.

The independent directors felt that shareholders' approval could mitigate any claim that NatSteel might have against VII on account of any breach of the sale and purchase agreement, which VII has denied.

A Tata Steel spokesperson declined to comment on the matter.

The main advantages of Prudential's offer were that it would provide cash directly to shareholders and that the offer price was at a significant premium to VII's historic trading prices.

This is the second time that Tata Steel has been involved in a takeover battle. Tata Steel was successful in the first "� for Anglo-Dutch steelmaker Corus "� after it outbid rival suitor CSN of Brazil.