UNITED KINGDOM: India's Tata Steel agrees $8 bln USD Corus bid

India's Tata Steel Ltd agreed on Friday (October 20, 2006) a 4.3 billion pound ($8.04 billion USD) takeover bid for Anglo-Dutch steelmaker Corus Group, extending a consolidation wave in the fragmented steel sector. Corus and Tata said in a joint statement they had agreed a cash offer valuing Corus at 455 pence ($8.57 USD) per share. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion USD acquisition of rival Arcelor this year. Tata Steel has arranged debt for the acquisition of Corus that includes the refinancing of most of Corus' existing debt, including its public debt, the companies said in a joint statement. Tata Steel UK, which has been formed to make the acquisition, has arranged a senior term loan of 1.6 billion pounds ($3.01 billion USD), a 350 million pound ($659.87 million USD) senior revolving credit facility and a 1.35 billion pound ($2.54 billion USD) mezzanine bridge loan, the companies said, via Credit Suisse, ABN AMRO and Deutsche Bank. The rest of the bid will be funded by a cash contribution from Tata Steel to Tata Steel UK of 1.836 billion pounds ($3.461 billion USD), they said. Also, Standard Chartered Bank has provided 196 million pounds (369.51 million USD$) of subordinated debt financing to Tata Steel UK. At a press conference in London on Friday Ratan Tata, chairman of Tata Steel, insisted that Corus would retain its identity. He said: "For us in India this is a very important moment in time. Our intention is that Corus will retain its identity for the foreseeable future, will remain we hope in terms of our philosophy a company that will continue be seen to remain an Anglo-Dutch company. The management will be substantially the same and together we will build a large and rather successful global company." His opposite number at Corus, James Ling, extolled the virtues of going into business with an Indian company. He told journalists: "We identified the need to have a strategic partner and a presence in a lower cost country with a growing economy, raw material availability, and where we could use and fully exploit our technology." The cost of insuring against a default by Corus in the credit derivatives market fell early on Friday and its bonds rose on the expectation they would be bought back, a trader said. Five-year credit default swaps on Corus fell 7 basis points to 129 basis points, the trader said, while its bonds rose, with the 7.5 percent euro bonds due 2011 up 0.75 percentage points to 109 percent of face value.

ITN Source | October 20, 2006

Tags:. .agreed. .valuing. .value. .rose. .material