Corus set for £5.7m Indian takeover

13 April 2012

Another giant of Britain's industrial and commercial heritage is set to fall into foreign hands after the board of Anglo-Dutch steel producer Corus - the former British Steel - today recommended a £5.7 billion takeover by Tata Steel of India.

The takeover at 455p a share will create the world's fifth-largest steel producer, welding Corus's position in the European steel market with Tata's far lower-cost capabilities in the booming markets of Asia.

Ratan Tata, chairman of Tata Steel and patriarch of the sprawling Tata conglomerate whose interests include ownership of Tetley Tea, said: "Corus and Tata Steel are companies with long, proud histories.

"We have compatible cultures of commitment to stakeholders and complementary strengths in technology-efficiency, product mix and geographical spread. Together, we will be even better equipped to remain at the leading edge of the fast-changing steel industry."

The industry is in the midst of a major round of consolidation, led by Britain's richest man, Lakshmi Mittal, and his Mittal empire.

Today's recommended offer does not prevent the emergence of a counterbidder - though down 6¾p today, the shares remain above the Tata offer price at 471¾p - and Corus admitted it had been hawking its business round other major international concerns.

They are believed to have included CSN of Brazil - with whom it had previously had merger talks - and Severstal, the giant Russian concern that is soon to float on the London stock market.

Corus chairman Jim Leng, who will join the board of Tata Steel as deputy chairman, said: "In the middle of last year, my board agreed a strategic way forward for Corus to seek access to low-cost production and high growth markets.

"Consistent with this, the company held talks with a number of parties from Brazil, Russia and India. This transaction represents the culmination of these talks.

"This combination with Tata, for Corus shareholders and employees alike represents the right partner at the right time at the right price and on the right terms."

The offer is equal to about half a year of Corus earnings and almost eight times current earnings. Although only 11 per cent above the share price earlier this month when Tata first broke cover, the offer is at a premium of 26 per cent to the average Corus share price over the last 12 months.

While Corus's 41,000 employees - many of them at Port Talbot in South Wales and at Scunthorpe, Hartlepool and Rotherham - have been anxiously awaiting the outcome of their board's negotiations, 165,000 pensioners have also been seeking assurances about their continuing retirement benefits.

Tata said today it will make a oneoff £126 million payment into the firm's pension schemes and increase its contribution rates to 12 per cent from 10 per cent over the next two-andahalf years.

The fall of Corus follows the foreign takeovers this year of BAA, P&O and Associated British Ports.

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