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Category: Business and Industry
Date Submitted: 11/03/2015 07:11 AM
TATA & CORUS: A Case of Acquisition
“There are not many opportunities for producers in emerging low-cost markets to gain
access to the markets of Europe other than by acquiring a company like Corus,”
John Quigley (Editor, Industry Publication Steel week)
Thousands of Indians didn’t offer prayers for Tata Steel to clinch the deal for the AngloDutch steel maker Corus, as they have for the recovery of hospitalized Bollywood
superstars. Nor did they erect 40-foot billboards of a smiling Ratan Tata, chairman of
Tata Steel, after he won Corus. And the stock markets were clearly concerned about the
Tata Steel’s new debt load. But despite all this, euphoria gripped the nation. Finance
minister P. Chidambaram offered unspecified help, if needed, to close the deal; fellow
steel magnate Lakshmi Niwas Mittal cheered the acquisition, and excited TV
newsreaders gushed. India’s first Fortune 500 MNC was born.
Tata acquired Corus, which is four times larger than its size and the largest steel producer
in the U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest
ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in
the same year. Over the past five years, Indian companies had made global acquisitions
for over $10 billion. The Tata bid almost equals this amount. Most of them have averaged
$100 to 200 million.
"It is a two-way street now," Kamal Nath (Commerce Minister, India) said.
"Not only India is seeking foreign investment, but Indian companies are
emerging investors in other countries."
Ratan Tata has said he is confident the two companies have “a cultural fit and
similar work practices.” Nearly 30 years ago J.R.D Tata had lured away a
young engineer from Corus’s predecessor company, British Steel, to work at
Tata Steel. That young Sheffield-educated engineer – Sir Jamshed J. Irani
(knighted by the Queen 10 years ago) – was Tata Steel’s managing director
until six years ago....