Financial Daily from THE HINDU group of publications
Tuesday, Aug 17, 2004
Corporate - Mergers & Acquisitions
Tatas make Rs 1,313-cr bid for Singapore's NatSteel
Mr B. Muthuraman, Managing Director, Tata Steel, announcing the bid for acquisition of the steel business of NatSteel Asia, through a video conference from Singapore with Mumbai journalists on Monday. Paul Noronha
Mumbai , Aug. 16
TATA Steel today pole-vaulted into the global steel manufacturing arena with the acquisition of the steel businesses of NatSteel Ltd for S$486.4 million or Rs 1,313 crore.
The company said that it has signed the definitive agreements with NatSteel for the all-cash transaction.
The steel businesses of NatSteel will be spun off into a wholly owned subsidiary called Natsteel Asia Pte Ltd.
NatSteel has a capacity to produce about two million tonnes per annum of rebars, wire rods, pre-stressed concrete wires and strands.
This acquisition gives not only gives Tata Steel a manufacturing footprint in seven new countries in Asia - Singapore, China, Malaysia, Thailand, Australia, Vietnam and the Philippines - but geographic access to the Asian region.
About 40 per cent of the capacity of NatSteel is in Singapore. Under the terms of the agreement, the enterprise value is subject to certain adjustments including those for any net debt, minority interest, other liabilities and for working capital variance relative to S$225 million.
"It does not have any significant borrowings and its liabilities to the tune of S$79 million has been adjusted in the enterprise value,'' Mr B. Muthuraman, Managing Director, Tata Steel, told newspersons from Singapore during a video conferencing session.
The Tata Steel scrip ended up at Rs 266.15 from the previous close of Rs 255.75 on the BSE.
Tata Steel has been looking at global acquisitions for quite some time. "This acquisition is very much in line with Tata Steel's stated growth and globalisation plan,'' said Mr Muthuraman. "It is an EPS accretive investment.''
The transaction is expected to be completed in 5-6 months once the regulatory approvals are through.
Tata Steel referred to this acquisition as a `beachhead' investment in the high-growth geographies of China and South East Asia. The acquisition also includes a 26 per cent equity interest owned by NatSteel in Southern Steel Bhd, a 1.3 million tonne steel maker in Malaysia.
According to Mr Muthuraman, this is India's largest investment in Singapore.
"Tata Steel's decision to go in for NatSteel stems from the fact that it has very good operating facilities and practices and is headed by a strong management team," he said.
This team and all the employees would be retained, he added. No decision has been taken as to who from the Tatas would head NatSteel as yet.
Mr Muthuraman said that while Tata Steel enjoys good brand recognition in India, NatSteel enjoys a similar reputation in the South-East Asian region. "We would like to retain the brand name.''
He also said: "I believe this acquisition will prove to be a good strategic fit. It is well known that there is a gradual shift of steel demand from the developed world to the developing world.''
Mr Oo Soon Hee, President, NatSteel, said: "With this transaction, NatSteel Asia will be well positioned to weather the volatilities in the steel industry.''
Tata Steel officials did not rule out the possibility of exports of billets made at Tata Steel as raw material for NatSteel, primarily to bring down the cost of production there. "At present, NatSteel uses scrap,'' an official said. NatSteel ended 2003 with turnover of S$1.4 billion and a profit before tax of S$47 million.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line