Thomas Steel parent OKs sale
The company being acquired owns a Warren plant that employs 300.
LONDON (AP) -- Corus Group PLC agreed to an 8 billion cash offer Friday from India's Tata Steel in a deal that will create the world's fifth-largest steelmaker.
Corus is the parent company of Thomas Steel Strip, a Warren steel processor that employs more than 300.
The deal, which will be India's largest-ever foreign takeover, extends the industry's recent wave of consolidation, coming on the heels of Mittal Co. NV's 26 billion-euro takeover of Arcelor SA this year.
The tie-up would create an entity with annual steel output just under 25 million tons and was hailed by both companies as the best way for each to remain internationally competitive, despite charges from one of Corus' largest shareholders that the offer undervalued the Anglo-Dutch business.
"The intention of these two companies has been built on a global strategy, not on an opportunistic or agenda-driven decision to acquire credit or absorb," Ratan Tata, chairman of Tata Steel, told a London news conference. "It is built on a competition strategy of being global."
However, Standard Life PLC, which owns around 7.9 percent of Corus, said that the 8.51 per share offer was "lower than we would have expected the board of Corus to agree to and recommend."
"The trading performance of Corus has been very strong and produced very attractive cash flows, which we believe could be worth more than the current price being offered by Tata."
Effect on market
Shares in Corus, Europe's second-largest steel producer and eighth-largest in the world, closed 1 percent lower at 8.91 on Friday. The stock has soared around 30 percent in just over a week on rumors about an approach from Tata.
Tata Steel shares rose 1.2 percent to close at 11 on the Bombay Stock Exchange.
Ratan Tata defended the offer price as "fair," while Corus Chief Executive Philippe Varin pointed out that it was 26 percent above the average share price for the past five months.
Standard Life stopped short of saying it would vote against the proposal and some analysts said that without the emergence of another bidder, it would be difficult to reject the Tata offer.
Other observers suggested that Standard Life's statement and the company's current market valuation meant a counter-bidder may emerge.
Russian steelmaker OAO Severstal, which is preparing for an initial public offering in London and intends to use some of the proceeds as acquisition currency, was named as a possible rival.
Corus refused to be drawn on its plans if a rival bidder emerged. Under the deal announced Friday, Corus would have to pay Tata an 81 million break-off fee if it backed another deal.
Corus Chairman Jim Leng said that the recommended deal with Tata was the culmination of talks with a number of parties from Brazil, Russia and India, adding that the two companies first began talks in December 2005.