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A gift that befits
our 100th year
Mr B Muthuraman |
No project
suggested to him as the Company’s Centennial Project seemed
befitting enough to the Managing Director, Mr B Muthuraman
for 100 years of Tata Steel. On November 26, 2005, two
gentlemen had come to the Chairman, Mr Ratan Tata with a
proposal for Tata Steel. Since that day, all that Mr
Muthuraman had wanted before August 26, 2007 was to ensure
that the Tata Steel-Corus marriage suggested by the Corus
Chairman, Mr Jim Leng did indeed get solemnised! A tad
over-age to marry, by regular standards, Tata Steel at 100,
is in corporate terms more than youthful enough to ensure
its success, Mr Muthuraman believed! Now that it has staved
off the advances of a much younger suitor, Mr Muthuraman
believes, “we should really be proud that a Company from
Jamshedpur, Jharkhand and from India has done something that
no other company in India has done. It is by a ratio of
1:10, larger than any other M&A by an Indian Company. But
these records are meant to be broken and I hope it is done
in a very short time.”
For
Jamshedpur, the Corus deal means that the city will be
recognised beyond the shores of India and the confines of
the global steel industry as, the home to an international
steel company. “Today, everyone in UK, Netherlands and the
rest of Europe recognises the name of Jamshedpur when they
see it,” Mr
Muthuraman announced to the local media. We bring you
snippets from his interactions with the local and national
media.
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On Corus
Corus is a very good company. Its people
are highly skilled. It has a great Research &
Development base and has many products for the
Automotive Sector, Construction Solutions and
Tinplate. The products and services of the company
have gone downstream and are of high quality. The
product quality of Corus is very good and I believe
Tata Steel can learn a lot from Corus. What Tata
Steel can offer them is the ability to master their
operations, to innovate in operations and to sweat
their assets. We have lined up many areas for cost
reduction.
On the other hand, Tata Steel will now be able to
bring Corus’ products to India apart from itself
having access to their markets. Each of the two
companies will benefit as they have tremendous
synergies.
On the combined entity
We have become a bigger company, of something
like 25 mn tonne capacity in many, many countries.
As the media said, “We are the second most
diversified in terms of geographies in the world.”
It will take us three years to export semis to Corus
but that is not the only objective for Tata Steel.
There are both positives and negatives to the export
of semis, which we have to examine. We want to
remain conscious of not hurting the company in any
way and to ensure that jobs are protected. Before
supplying slabs, We want to make them more
competitive.
In terms of synergies, we see synergies in
operating practices in many areas, we see synergies
in the procurement of materials, we see synergies in
the market place, we see synergies in shared
services, we see synergies in improvement of our |
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operations in India using what Corus has in some
areas, which is better than us. In terms of total
synergies we believe that it is roughly about US$
300-350 million per year. It is from the third year
that we expect to realise the full synergy, but they
will start clocking in from the first year, increase
in the second year and all will be complete by the
third year.
On the potential financial risk to
Tata Steel
The financing for Corus has been structured in
such a way, through a Special Purpose Vehicle, that
the loans are on the Corus Balance Sheet. It will
have a 60:40 Debt to Equity ratio, with Tata Sons
providing the equity. We have made sure that Tata
Steel is fully ring-fenced, so that none of Tata
Steel’s growth plans in Jharkhand, Orissa or
Chhattisgarh suffer. The exact financing structure
will be announced after the Corus EGM on March 3,
2007.
On the immediate purchase of 21.1% of Corus
The deal was finalised at 1:00 a.m. GMT or at
6:30 a.m. IST, when the stock markets were closed. A
price of 608 pence per share had been fixed. In the
normal course, the shareholders would have had to
wait for the EGM and the one month after it to
tender their shares. Instead, they put their stocks
on the market the next day to realize their money
while Tata Steel got a foot-in by immediately buying
21.1% of the shares on the market. |
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