India – a Steel Giant of the Future?

Here is an interesting news item on how Tata Steel is eyeing a takeover of a large European Steelmaker – Corus.

Tata Steel is said to be eyeing Anglo-Dutch steel producer Corus Group. Even as Tata Steel has officially denied any takeover plans, there is mounting speculation that the Tatas are in talks to acquire a majority holding in the company for anything between $8-9 billion (Rs 36,000 crore-41,000 crore).

Goldman Sachs and UBS Warburg are reportedly working at raising the funds for Tata Steel. Others interested in buying out Corus are Russia’s Severstal and Ervaz.

Severstal was locked in an intense battle with L N Mittal a few months ago when it bid for control of European steel giant Arcelor.

That round went to Mittal. If this deal goes through in favour of the Tatas, it will mean several things.

Corus is currently one of the largest steel producers in the world with 18 million tonnes of production capacity spread across the UK, the Netherlands, Germany, France, Norway and Belgium.

With Tata Steel’s own capacity at seven million tonnes, the combined entity could potentially be the fifth largest steel producer in the world after Nippon Steel and Posco. What’s more, in Europe, Corus is a household name.

More importantly, the company is a technology frontrunner and sells its know-how to steel companies across the world. A stake in Corus, therefore, will not only represent the most expensive acquisition in Indian business history, it will also dramatically upscale Tata Steel’s position in the global steel pecking order.

Corus currently generates 10 billion pounds (about Rs 87,000 crore) in turnover, making it much larger than Tata Steel with a turnover of Rs 15,139 crore.

Sources close to the company say that Tata Steel also has an eye on German steel maker ThyssenKrupp. Like Corus, the German company is a household name in Europe and can produce 17 million tonnes of steel annually.

It may be recalled that a few years ago, when Gautam Singhania’s Raymond Ltd put up its steel business on the block, Tata Steel had bid for it.

But ThyssenKrupp got ahead of Tata Steel and acquired the venture instead. Analysts believe Tata Steel stands to gain enormously if it manages to acquire control of Corus.

Currently, it does not have a toehold in Europe and the US, 54% of which is controlled by Arcelor Mittal.

By the way Corus stock jumped on the rumors of Tata Steel takeover in Europe:

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Corus, the U.K.’s biggest steelmaker, jumped 12 percent to 455 pence. Tata Steel Ltd., India’s second-largest, said in a statement that it’s “evaluating” acquisition opportunities globally, including Corus.

Tata may offer 580 pence a share for Corus, Business Standard reported earlier, citing unidentified people “close to the development.”

This essentially will concentrate a large amount of steel making capacity the world over in the hands of two Indian origin companies – Mittal and Tata! With Posco investing heavily in India with its plant – the World Steel market will have heavily based out of India!

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