IndiaPost.com - Corus shareholders approve Tata Steel offer

LONDON/MUMBAI: Tata Steel received a thumping vote of confidence for its 12 billion dollar takeover bid for Corus Group Plc, with shareholders having 96 per cent equity in the Anglo-Dutch company voting in support of the deal that will create the world's fifth-biggest steelmaker.

Holders of 96 per cent shares of Corus Group voted in favor of Tata's bid at an extraordinary general meeting held, where about 23 per cent shareholders voted by proxy. Corus Board had recommended Tata Steel's revised offer of 608 pence a share after the Indian giant outbid a 603 pence offer from rival suitor Brazil's CSN in a regulator-held nine round auction late in January.

The acquisition, India's largest takeover on foreign soil, would make Tatas world's fifth-biggest steel producer and is the second largest transaction after the 38 billion dollar takeover of Arcelor by Mittal Steel. Interestingly, Tata Steel has already acquired close to 22 per cent stake in Corus since winning the auction through open market transactions. Meanwhile, sources close to the development said Tata Steel might raise most of the additional sum required to fund the deal in form of equity rather than the debt facilities.

Tatas are yet to finalize funding details for the additional sum it would have to pay after it raised its offer to 608 pence from an initial bid of 455 pence a share. Tata group firms would contribute 4.1 billion dollars for the deal. Tata Steel Managing Director B Muthuraman said in a statement: "We are pleased with the outcome of the EGM and stand committed to work along with Corus to create a vibrant and value-creating enterprise.

The deal is expected to become effective on April 2 and Corus shares would stop trading on exchanges on March 29. Meanwhile, Bloomberg quoted Corus CEO Philippe Varin as saying that "the intention of this acquisition is about growth, not about job losses", apparently in a bid to allay apprehensions among Corus workers.

Corus officials also believe the company's debt-to-equity ratio would be better than the time when Tata made its first offer at 455 pence per share. The shareholder vote marks the end of a bidding war that began in December last year after CSN announced its intention to launch a rival offer for Tata Steel's recommended bid of 455 pence announced on October 20.

Tata Steel had revised its bid to 500 pence a share on December 10, which was countered by a 515 pence offer from CSN the very next day. The UK's Takeover Panel had to intervene to resolve the bidding war in December last year, which set a nine-round auction process to finalize the winner. The deal is the second biggest acquisition in the steel industry after Mittal Steel's 38.3 billion dollar takeover of Arcelor last year.

Shares of Corus were at 605 pence in midday trade, as against 407.5 pence a share on October 5 when Tata had first announced that it was considering an acquisition of Corus. Corus was advised by Credit Suisse Group, JP Morgan Cazenove and HSBC Holdings, while Tata Steel was advised by Deutsche Bank, ABN Amro Holding and NM Rothschild & Sons Ltd. Brazilian rival CSN was advised by Lazard and Goldman Sachs Group on the deal.