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Urgent Stock Market Message

India's takeover of British Steel as Corus backs Tata's takeover bid

Companies / Strategic News Oct 20, 2006 - 04:20 AM GMT

By: Nadeem_Walayat


Reports say that Corus, UK based steel giant, has backed Tata's $9 billion take over bid. According to the Financial Times , the board of Corus, the Anglo-Dutch steel maker, has recommended 5.1 billion pound takeover bid to the shareholders.

And the report says that Corus will make a statement about this, possibly as soon as Friday. The move will end the chances of any potential counter-bidders for the world's eighth biggest steel maker. Novolipetsk and Severstal, two Russian steel companies, and CSN, a Brazilian steel maker, are thought by some steel industry observers to be interested in making a counter bid.

Corus shares have been trading at levels higher than Tatas' proposed bid price of 455 pence a share since the offer was announced. This was largely on expectations that another bidder will attempt to trump Tata Steel's deal, but such a move was unlikely since Corus has been exploring for a buyer for most of this year and has previously talked to nearly all potential candidates.

The deal, if clinched, would make Tata Steel the world's sixth largest steel maker and enhance the Indian company's capacity to 23 million tonnes a year from just 5 million tonnes at present.

Many steelworkers who took advantage of Corus's Sharesave scheme - buying up to £150 worth of shares a month with a "no lose" guarantee - purchased shares as low as 19p each. But this week, partly due to Tata's audacious £4.1bn (£5.1bn if you count Corus's £1bn debts) bid for the steel firm its shares have been trading as high as £5 each, a rise of more than 400%.

Indian steel companies flush with profits from record steel prices have been on a spending spree across the world buying up steel producing capacity.

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


30 Oct 06, 03:24
Re: India's takeover of British Steel as Corus backs Tata's takeover bid
Hi All,

Here are some interesting facts about the transaction.

As found in the internet



Corus Group Takeover In London

When I read the news of ninth ranked Corus take over by 56th ranked Tata Steel, first thing that struck me was that majority of the business for the merged company shall be from Europe and this new entity may be required to pay most of the taxes in Europe.

On searching the sites and studying the Corus press release many startling information was uncovered not disclosed by our press.

[The Acquisition will be made by Tata Steel UK, a wholly-owned indirect subsidiary of Tata Steel, and will be implemented by way of a scheme of arrangement under section 425 of the Companies Act 1985.]

1. Wholly owned Tata Steel UK would buy Corus Group, not Tata India. So it is not an Indian take over but a British company taking over another British company. Money will be pumped into TS UK from India and it shall pay all taxes in UK.

2. Takeover process in unfinished. Shareholders of Corus Group have raised objections and may like more money than presently agreed.

3. Tata Steel UK subscribing to UK laws means foreign nationals will acquire shares in it son hold majority or near majority.

>> This is just one illustration of why I rate Manmohan Singh as Quack. I repeatedly opposed the India takeover code in 1995-6 formulated by Bhagwati Committee.

India allowed only 1% acquisition of shares by NRIs in a year and collectively all NRIs could take 5% share in an Indian company. In just one transaction $8billion is pumped in to UK economy.

Manmohan Singh and ABV governments made takeovers very difficult for NRIs and foreign companies. Thus India has lost opportunities to invest bulk infusion of capital and technologies over 15 years in India.

Wouldn’t it been better if Corus Group invested $4b Indian to take over Tata Steel in India and pay all taxes also?

As GOI he ought to have preferred inflows of capital and with it technology and marketing resources. Take over Reliance Petroleum or even Maruti would have inducted well over $100b to $200b in to Indian economy over 15 years accelerating development, boosting exports, creating jobs and generating taxes to the government.

Manmohan Singh Government is not governing India but is governed by Ambani’s and Tatas.

[The Acquisition will be made by Tata Steel UK, a wholly-owned indirect subsidiary of Tata Steel, and will be implemented by way of a scheme of arrangement under section 425 of the Companies Act 1985.]

14. Financing

[The Acquisition will be funded by a cash contribution by Tata Steel to Tata Steel UK to the extent of £1,836 million. In addition, Standard Chartered Bank has provided subordinated debt financing to the extent of £196 million to Tata Steel UK. To finance the balance of the consideration due under the Acquisition, Tata Steel UK has in place senior, mezzanine bridge and working capital loan facilities of a total aggregate amount of £3,300 million (comprising senior term loan facilities of £1,600 million, a £350 million senior revolving credit facility and a £1,350 million mezzanine bridging loan facility), which have been jointly arranged and fully underwritten by Credit Suisse, ABN AMRO and Deutsche Bank. These debt facilities will also be used to refinance the majority of the existing debt of the Corus Group (including, it is currently anticipated, the existing public debt), provide working capital for the Corus Group after completion of the Acquisition and pay certain
fees and expenses associated with the Acquisition.

ABN AMRO and Deutsche Bank, as joint financial advisers to Tata Steel and Tata Steel UK, are satisfied that sufficient resources are available to satisfy in full the consideration payable to Corus Shareholders under the terms of the Scheme. Further information on the financing of the Proposals will be set out in the Scheme Document.

Under the agreement for the provision of the debt facilities, Tata Steel UK has agreed, save as may be required by the Panel or the Court, not to waive, amend, withdraw or agree not to enforce any material term or condition of the Scheme in any material respect without the prior consent of the agent for each debt facility agreement.]

[The Scheme will be governed by English law. The Scheme will be subject to the applicable requirements of the Takeover Code, the Takeover Panel, the London Stock Exchange, the UK Listing Authority and the Amsterdam Stock Exchange.]

owain michael williams
18 Jun 08, 07:59
british steel shares

i have some bsc shares and would like to sell them,how do i go about it.

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