Tata Steel Outbids CSN for Corus
India’s Tata Steel said Wednesday it outbid Brazilian rival CSN to take over European steelmaker Corus Group PLC, after offering $11.3 billion for the acquisition, the biggest ever by an Indian company.
The U.K. Takeover Panel called the auction to end a bidding war after Brazil’s Companhia Siderurgica Nacional (nyse: SID – news – people ) SA last month made a 4.9 billion pound ($9.6 billion) bid for Corus that topped a sweetened offer of about $9.2 billion by Tata Steel.
The panel presided over the auction process that started late Tuesday and continued for several hours until CSN bowed out.
Officials at CSN and Corus could not be immediately reached for comment.
The winning bid represents a 22 percent premium of the $9.2 billion Tata Steel had offered to pay in October, which was later trumped by CSN, the statement said.
Tata Steel said its financial advisers to the transaction, which include ABN Amro (nyse: ABN – news – people ), NM Rotchschild and Deutsche Bank (nyse: DB – news – people ), are satisfied that sufficient resources are available to execute the all-cash deal
The European Commission had earlier cleared both Tata Steel and CSN as eligible to make a possible acquisition of Corus, which has been searching for a business partner with assets in low-cost countries as rising raw material and energy costs in the Britain and the Netherlands chip away at profits.
A successful acquisition of Corus will transform Tata Steel – currently ranked 56th in the world in terms of output – into a global player in the metal business.
A combined Tata-Corus would have annual steel production of 25 million tons, making it the world’s fifth largest steel producer.
It would also continue the consolidation in the global steel industry after Mittal Steel Co. NV (nyse: MT – news – people )’s deal to acquire Arcelor SA to create a powerhouse which has a 10 percent share of the market.
Some analysts argue that further consolidation will give the industry more pricing power and greater economies of scale.
Corus – formed in 1999 when British Steel and Koninklijke Hoogovens (other-otc: 64701.PK – news – people ) of the Netherlands combined – has plants in Britain, the Netherlands, Germany, France, Norway and Belgium. It sells steel and aluminum products worldwide and employs 47,300 people.
The acquisition of Corus will help “improve our negotiating power in the global steel market,” J.J. Irani, a director on the board of Tata Steel, told the Indian NDTV television station. “From a small player we will now become a big player in the world market,” Irani said.
The Corus takeover would be the latest in a string of overseas acquisitions by top Indian companies, which are seeking global visibility after decades of thriving on government protection.
Working in their favor is a radical change in international perception, especially among investment bankers, that Indian firms are creditworthy and that many have the potential to become global companies. Changes in government policy, such as easing foreign currency restrictions, have also helped.
Kamal Nath, India’s commerce and industry minister, welcomed the development, saying “this means the global perception of India is changing.”
“It is a two-way street now. Not only India is seeking foreign investment but Indian companies are emerging investors in other countries,” Nath said.
The winning bid for Corus is more than what India received in foreign direct investment last year.
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