Wednesday, October 18, 2006

Tata Steel Steals The Show By Proposing To Corus

I told you in my last post titled 'Acquisition - The Stepping-Stone To The Path Of Success' how acquisitions are becoming commonplace in business. I also mentioned about this particular deal - Tata Steel taking over Corus likely to materialise shortly. Now it is very much official. The ball has been set rolling by Tata Steel - the first steel company and the biggest in the private sector in India; they have made an offer of 455 pence (Rs 385 approximately) for each share of Corus and if it goes through, it will be the third biggest acquisition in the steel industry. Of course, the mother of all acquisitions remains Mittal-Arcelor's at an investment of $43.63 billion followed by Kawasaki's takeover of KK Corp at $11.89 billion.
After the takeover, Tata Steel-Corus combine will have steel production capacity of 23 million tonnes. Presently, Corus is ranked 8th and Tata Steel 55th in global steel capacity. The deal is most likely to go through even as Corus has been courted by other suitors. Tata Steel has the advantage of producing the cheapest steel in the world by having captive mines and its cost is not subject to the vagaries of price fluctuations of raw materials. Corus has a steady market in Europe for its high-valued products having applications in construction, automobile and aerospace industry.
I think the acquisition will send out a message loudly to the world that Indian companies are having the right stuff to become multi-national companies (MNCs). But to call spade a spade, the steel in the raw form will be made in India with all the attendant problems of polluting the environment while the finishing operations will be done in Europe; it will put Indian MNCs at the bottom of the list.
In any case, you cannot have the cake and eat it too!

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