10-18-2006, 04:20 AM
[center]<b><span style='font-size:14pt;line-height:100%'>Pursuing Mittal, Tata to buy Corus</span></b>[/center]
LONDON Corus Group of Britain is days away from being taken over by Tata Steel of India in a £4.05 billion cash deal, the latest sign that steel producers are rapidly going global.
Corus said Tuesday that it had received a 455 pence a share bid from Tata worth $7.6 billion, valuing the entire company at $10.2 billion, including debt.
Several people involved in the negotiations said that Tata had already conducted due diligence on Corus and that a deal would be announced within days.
The combination would create one of largest steel companies in the world, about the size of U.S. Steel, and could further accelerate takeovers and mergers in an industry that is consolidating fast to keep up with the largest player, the newly created Arcelor Mittal.
Indian steel companies are under pressure to expand abroad. China recently became the largest steel exporting area in the world, leap-frogging Japan, Europe and Russia in the first half of this year, according to ISSB, a London-based consultancy.
Indian steel exports have "suffered from losing most of their trade with China," ISSB said in a recent report.
Corus, which has annual sales of £9 billion, produces carbon steel products for industries from autos to construction, and makes about 80 percent of its sales in Europe. The company has said that finding low-cost steel production is a goal.
Tata Steel, part of the fast-growing conglomerate Tata Group, manufactures some of the lowest-cost steel in the world through sites in Southeast Asia.
<b><span style='font-size:14pt;line-height:100%'>The deal is unusual because Tata Steel is a small fraction of the size of Corus : the Indian company's production capacity is 3.1 million tons a year, compared with Corus's 21.4 million.</span></b>
Corus investors, anticipating a buyout, drove the company's stock price as high as 506.12 pence in recent days. The shares closed Tuesday in London at 479 pence a share, well above the offer price, as investors hoped for a richer bid.
"The market will always be disappointed when there is not a premium," said Mark Lovett, an equities fund manager for RCM, which owns Corus shares.
The offer values Corus at $450 per ton of capacity, said Kuni Chen of Bank of America. Other recent steel transactions have been in the $500 to $1,000 range, he said. Chen said that the strategy for the combination was sound and that potential synergies could come from Tata's access to iron ore and the company's manufacturing practices.
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