<b>Tata-Corus</b>: 'Tad costly, but high potential'

B Muthuraman, CEO of Tata Steel, admitted that the 608pence per share being offered for Corus "may look expensive based on 9 EV/EBIDTA (2005), but the acquisition is a tremendous strategic fit for Tata Steel."

He added that full synergy would start acruing from the third year, and would result in savings of $350 million per year.

The cost of steel at $710 per tonne would be still lower than the industry average, he added.

Tata Steel is expected to limit its contribution to the deal at around $4 billion, and the SPV route is being finalised based on the Tata Steel's initial bid of 455p/share.

Lauding the deal, Muthuraman said it is a very important and significant step for the company and the country.

"India has a tremendous future in the steel industry and potential in many areas in which we could be world leaders," he said, adding the deal would bring 19 million tonne per year capacity into the Tata Steel basket.

The deal has given the company access to developed markets of Europe and the company plans to go downstream in the European markets than the emerging economies.

After the formalities get over, which is expected to take take three to four months, executive committees and task forces would be created for facilitating integration with group companies, he said.

The company has identified several synergies in procurement of materials, improvement of operations in the market place and practices using Corus's abilities to bring improvement in operations in India.