Tatas buy NatSteel unit for Rs 1,313 cr

Tata Steel to get manufacturing footprint in 7 countries.

The country's largest private sector steel maker, Tata Steel, today said it had signed a "definitive agreement" with Singapore-based NatSteel to acquire all of the latter's steel business in an all-cash transaction, valued at S$486.4 million ($283.1 million or Rs 1,313 crore). NatSteel has an installed capacity of 2 million tonnes per annum.

The acquisition will get Tata Steel a manufacturing footprint in seven countries. NatSteel is Singapore's largest steel company and runs steel mills in China, Thailand, Australia, Vietnam and the Philippines. Apart from steel, NatSteel has interests in industrial and chemical sectors in the Asia-Pacific region.

NatSteel will spin off its steel business into a wholly owned subsidiary, NatSteel Asia Pte Limited. Tata Steel will then acquire 100 per cent of the equity interest in NatSteel Asia. The acquisition also includes a 26 per cent equity interest owned by NatSteel in Southern Steel Berhad, a 1.3 million tonne steel company in Malaysia.

In a media statement, B Muthuraman, managing director, Tata Steel, said: "The acquisition of the steel business of NatSteel is an important step in Tata Steel's plans to build a global business, as NatSteel's business provides Tata Steel access to key Asian steel markets, including China." We will be looking at growth in these markets through expansion of the existing facilities."

NatSteel's steel business produces rebars, wire rods, pre-stressed concrete wires and strands. It reported a turnover of Rs 3,820 crore for the year ended December 31, 2003.

The enterprise value of the transaction at Rs 1,313 crore also includes minority interest, liabilities and working capital requirements worth over Rs 600 crore. NatSteel Asia will have an outstanding debt of around Rs 215 crore. "A large part of the cash pay-out will be made out of internal resources," Muthuraman said.

NatSteel Asia will retain its existing management structure. "The current management structure, including its employees, will be retained. However, the board of the new company has not been formed. Therefore it is not decided who will represent Tata Steel on NatSteel's board," Muthuraman said.

Oo Soon Hee, president, NatSteel, said, "With this transaction, NatSteel Asia will be well positioned to weather the volatility in the steel industry, because it will be part of a much larger, fully integrated steel group with extensive resources."

Tata Steel will be supplying semi-finished steel and billets to all NatSteel manufacturing facilities. "Currently, NatSteel sources scrap for producing its products. However, we will be now supplying semis to NatSteel from Tata Steel's existing resources in India," Muthuraman said.

The transaction is expected to be completed in the next 5-6 months, after obtaining regulatory approval. Baker & McKensie and AZB & Partners were the legal advisers to Tata Steel for the transaction, while the corporate advisory group of Standard Chartered Bank was the exclusive financial adviser to the company. Deloitte & Touche were the accountants for the transaction.

Click for NatSteel press release
 

Tatas stepping abroad

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• Tata Steel's takeover of NatSteel's steel business is the third overseas acquisition by the Tata group in recent times
• Tata Tea had in early 2000 acquired Tetley, the world's second largest tea company for £271 million
• Early this year, Tata Motors acquired the south Korean Daewoo Commercial Vehicles for $102 million

As are the others

How do these acquisitions compare with overseas acquisitions by the Reliance group? The group acquired US based Flag Telecom for $211 million in January 2004 and recently acquired the Germany-based Trevira for € 80 million