October 21, 2006

TATA to acquire Corus Group for $8 Billion

Tata Steel Ltd. agreed to buy Corus Group Plc for 4.3 billion pounds ($8 billion), creating the world's fifth-largest steel producer as prices rise toward a record.

Tata Steel, based in Mumbai, will pay 455 pence a share in cash for Corus, Tata said in a statement today. Shares of Corus traded at 474.25 pence in London today, indicating some investors expect a competing offer. Standard Life Plc, Corus's biggest shareholder, said the bid was too low.

Buying Corus, formerly British Steel Plc, will lift Tata from 65th in global rankings and strengthen Asia's grip on world production. Steelmakers want greater control over production to bolster their bargaining power with clients and suppliers. The deal would be the industry's second biggest this year, behind Mittal Steel Co.'s $38.3 billion purchase of Arcelor SA.

"Any steel company after the Mittal-Arcelor deal needs to scale up if they want to grow and this deal allows Tata Steel to do just that,'' Jon Thorn, who manages $250 million in Indian stocks at India Capital Fund Ltd., said by phone from Hong Kong. "This industry is going to consolidate fast and if you don't find a partner to work with, or buy one, you'd get taken out.''

Chairman Ratan Tata will add finishing mills in the U.K. and the Netherlands to raw-steel making plants, furnaces and iron-ore mines in Asia. The new company will have combined revenue of $24.4 billion, with two-thirds of sales in Europe, according to the companies.