Tata Steel in global arena with Corus win

Adds $10.8 bn to group market cap; CSN to gain pound 207 mn; S&P downgrades Tata steel.

After seven and a half hours of intense bidding, Tata Steel emerged victorious Wednesday morning in the battle for Corus Group, quoting 608 pence a share, about a third higher than its first offer in October last year.

At one minute past midnight London time, Tata Steel's advisors pushed the button on the winning bid, 5 pence higher than CSN's final bid, in the auction organised by UK's takeover panel.

The jubilation was marred as the stock market, amid fears that Tata Steel may have overpaid, beat the stock down 11 per cent on the Bombay Stock Exchange.

Besides, global rating agency Standard & Poor's today put its BBB long-term corporate credit rating on credit watch with negative implications.

Meanwhile, CSN gained 6.2 per cent in Sao Paulo and Corus climbed 7 per cent in London.

Tata will pay $12.15 billion (around Rs 55,000 crore) in cash for the Anglo-Dutch steelmaker, making it the largest acquisition by an Indian company and the second largest in the industry after Mittal Steel's $38.3 billion acquisition of Arcelor.

This was the ninth round of an auction that was conducted over email, bringing the curtain down on Project Colour, the code name for Tata's bid for Corus.

The acquisition makes Tata Steel the world's fifth largest steelmaker, adding 19 million tonnes of steel-making capacity.

In a hurriedly convened press conference, a tired but elated Ratan Tata, chairman, Tata Steel, said: "The market is taking a short-term view and a harsh view... Hopefully, it will look back and say the acquisition was the right move."

A Business Standard Research Bureau study reveals that Corus will add $10.88 billion to the group's market capitalisation, taking the total to $69.08 billion.

The acquisition will also add $19.97 billion to the company's revenue, taking group revenue to $41.87 billion, 63 per cent ($26.54 billion) of which will come from overseas.

Tata will be chairman of the Corus board, taking over from Jim Leng, who will become vice-chairman. Two more berths will be reserved for Tata Steel .

Tata Steel MD B Muthuraman, acknowledging that the price, at nine times the 2005 earnings before interest, tax, depreciation and amortisation, appeared high, said it was "worth every penny" given the synergy between the two companies that will add $350 million every year from year three to the combined entity's bottom line. CSN, which holds 3.6 per cent of Corus's equity, stands to gain £207 million.

Tata Steel has informed the London Stock Exchange that it will buy shares of Corus from the open market tomorrow.

Standard Life Investments, Corus's biggest institutional investor, sold its 7.5 per cent stake after Tata Steel won the bid battle.