Buying out steel majors


India Inc has been on an aggressive acquisition spree overseas, but here’s one that will be the mother of all takeovers if it goes though. Tata Steel is said to be eyeing Anglo-Dutch steel producer Corus Group. Even as Tata steel has officially denied any takeover plans, there is mounting speculation that the Tatas are in talks to acquire a majority holding in the company for anything between $8-9 billion. Goldman Sachs and UBS Warburg are reportedly working at raising the funds for Tata steel.

Others interested in buying out Corus are Russia’s Severstal and Ervaz. Severstal was locked in an intense battle with LN Mittal a few months ago when it bid for control of European steel giant Arcelor. That round went to Mittal.

If this deal goes through in favor of the Tatas, it will mean several things. Corus is currenty one of largest steel producers in the world with 18 million tones of production capacity spread across the UK, the Netherlands, Germany, France, Norway and Belgium. With Tata Steel’s own capacity at seven million tones, the combined entity could potentially be the fifth largest steel producer in the world after Nippon Steel and Posco.

What’s more, in Europe, Corus is a household name. More importantly, the company is a technology frontrunner and sells its know how to steel companies across the world. A stake in Corus, therefore, will not only represent the most expensive acquisition in Indian business history, it will also dramatically upscale Tata Steel’s position in the global steel pecking order.

Corus currently generates 10 billion pounds (about Rs. 87,000 crore) in turnover; making it much larger than Tata Steel with a turnover of Rs. 15,139 crore.

Sources close to the company say that Tata Steel also has an eye on German steel maker ThyssenKrupp. Like Corus, the German company is a household name in Europe and can produce 17 million tones of steel annually.

Analysts believe Tata Steel stands to gain enormously if it manages to acquire control of Corus. Currently, it does not have a toehold in Europe and US, 54% of which is controlled by Arcelor Mittal. With Corus, Tata Steel stands a fighting chance in carving out a share of the lucrative auto components market.

Some world capacity related statistics,

———————————————— (Million tones)
1. —————-Mittal Steel—————-63.0
2. —————-Arcelor (Europe)—————-46.7
3.—————-Nippon Steel (Japan)—————-32.0
4.—————-POSCO(S. Korea)—————-30.5
5.—————-JFE (Japan)—————-29.9
6—————-Shanggai Baosteel—————-23.8
7.—————-US Steel (US)—————-19.3
8.—————-Nucor Corp(US)—————- 18.4
9. —————-Corus Group (Europe)—————- 18.2
10.—————-Riva Group (Europe)—————- 17.5
11.—————-ThyssenKrupp (Europe)—————- 16.5
12. —————-Tata Steel (Asia) —————-7.00