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Tatas skirt foreign issue to fund Corus
Tata, Muthuraman: Smart game plan

Jamshedpur, March 4: Tata Steel has ruled out any issue of GDRs or ADRs to part-finance the $11.3-billion acquisition of Corus. This was one of the options under consideration to finance the takeover.

Tata group chairman Ratan N. Tata said the company would not list overseas.

The funding for the Corus deal will comprise 60 per cent debt and 40 per cent equity offering.

Speculation is rife that in the absence of an overseas listing, the company may make a rights issue to raise funds. If this happens, it will be after 22 years that the company will make a rights issue.

A rights issue was better than an overseas listing as it does not dilute the promoter’s stake, experts said.

Tata Steel had passed an enabling resolution to raise up to Rs 6,500 crore or $1.4 billion through equity in its last annual general meeting.

Tata Steel managing director B. Muthuraman, who accompanied Tata to the Steel City for the Founder’s Day celebrations, said the details of financing Corus were still being worked out.

“All I can say is that it will be in a debt-equity ratio of 60:40, but the details will come out in the next few weeks,” Muthuraman said.

The Corus shareholders will vote on the Tata offer next Wednesday, and the Indian company is likely to take control of the Anglo-Dutch steelmaker by April.

This will involve paying off all Corus shareholders.

Tata said Corus would be an unlisted subsidiary of Tata Steel.

Merger process

Once the deal is done, all eyes will be on integrating the businesses of the two companies. Muthuraman said the aim was to reap the synergies as quickly as possible.

The two can work on sharing best practices, research and development and marketing, apart from the much-talked-about strategy to send low-cost slab from India to feed Corus’s European operations.

Muthuraman said the benefits of synergy, estimated at $350 million, can be obtained without despatching slabs to Europe.

An integration committee, comprising representatives of both the companies and chaired by Tata, will be set up. It will be a shadow board for both Tata Steel and Corus.

The boards of Corus and Tata Steel will also be recast after the takeover.

Tata said the Indian company’s board would reflect the international nature of its operations. Tata Steel expects to leverage Corus’ strengths in construction solution, automotive processes, tinplate and packaging.

On whether the integration would lead to job losses at Corus, Tata said, “This coming together will be a story of growth and not a story of cutting back or closing down plants.”

We should do whatever is right for the situation...We should make Corus competitive. That does not only mean that we have to cut jobs. At the same time, I don’t think we are given to giving any guarantee or assurances as such,” Tata added.

Raw materials

Tata Steel plans to enter into strategic alliances across the world for coal, iron ore and raw materials for Corus. The alliances could be partnerships or buying into other companies.

“We are already working on how we can improve competitiveness of raw materials of Corus, not from us (Tata Steel) but elsewhere in the world through our contacts and connections,” Tata said.

He added that enquiries have been placed in Australia for securing coal for Corus, though he did not divulge the details. Tata Steel had picked up a 5 per cent stake in Carborough Downs project in Queensland, Australia some time back.

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