International Herald Tribune

Tata Steel looks at merger of Corus Gp of U.K.

By Debarati Roy and Stuart Wallace

October 6, 2006

MUMBAI, India Tata Steel, the second-biggest Indian steel maker, may bid for Corus Group in what would be the largest foreign takeover by an Indian company.

Shares of Corus rose sharply Thursday after Tata said in a statement that it was looking at "various opportunities," including Corus, based in London.  A purchase of Corus, propelling Tata to sixth from 56th in world rankings, would be its first outside Asia and would add technology allowing it to make higher-margin products. In India, Tata is second only to Steel Authority of India, which is 86 percent owned by the government.

A takeover of Corus by Tata would increase the muscle of steel producers from developing countries. Emerging economies now account for six of the 10 biggest steel-making nations. China alone makes almost a third of the world's steel.

Tata Steel is controlled by Tata Group, which had sales of $18 billion in the fiscal year that ended March 31, 2005, equal to 2.8 percent of India's gross domestic product. The company, founded 138 years ago, controls 93 businesses in sectors including software, engineering and chemicals.

Tata Steel, which produces 5 million metric tons of steel annually in Jamshedpur in east India, plans to increase output to 30 million tons over the next decade by building new plants and acquiring rivals. The company has expanded in Southeast Asia by acquiring Millennium Steel in Thailand, which produces 1.2 million tons of steel a year, and NatSteel of Singapore, which makes 2 million tons a year.

Corus produced 18.2 million tons of steel last year, mostly from plants in Britain and the Netherlands. The construction industry accounts for 30 percent of its sales; engineering, 20 percent; and automotive, 16 percent. About 80 percent of its sales are made in Europe, and 8 percent in Asia.

"Corus is seen as one of the smaller companies in the steel universe that is ripe for merger, and there has been lot of talk about Russian or Indian or other companies," said Jim Lennon, an analyst for Macquarie Bank in London. "There has been a lot of consolidation in the last four to five years. The focus is now on Asia and further consolidation in Europe."

World steel demand is expected to expand by 8.9 percent this year, compared with 4.1 percent last year, according to the International Iron & Steel Institute in Brussels.

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