The Hindu Business Line : Tata Steel to buy Thai co for $130 m

TATA Steel announced today that it has signed definitive agreements with Cementhai Holding Co, a 100 per cent subsidiary of Siam Cement Co, Thailand to acquire its shares and invest additional equity in Millennium Steel Co.

Cementhai Holding, which controls 40 per cent in Millennium Steel, will sell its shares in a voluntary tender offer that Tata Steel will make for all equity and preference shares of Millennium Steel. Tata Steel's acquisition cost will be $130 million (approx. Rs 600 crore).

The investment is a significant move for Tata Steel, which had earlier acquired NatSteel's steel business, said Mr B. Muthuraman, Managing Director, adding that it will augment the company's position in the South-East Asian market.

Strong fit: "The acquisition will have a strong fit with our strategic expansion plans," he told newspersons.

Millennium Steel, with a capacity of 1.7 million tonnes per annum producing long products for construction and engineering steel for auto industries, is now the largest player in the Thai steel space.

The conditions precedent to the transaction will include shareholder and creditor approvals for issuance of new shares equivalent to 24.99 per cent in the expanded capital of Millennium Steel.

Also, there will be amendment of articles of association of Millennium Steel, which will allow 100 per cent foreign ownership.

Besides, regulatory approvals will be needed, including those from the Board of Investment in Thailand.

The tender offer and subscription to new shares by Tata Steel will be at 1.15 baht a share. Standard Chartered Bank was the financial advisor to Tata Steel in this regard.

Millennium Steel, formed through a merger of three companies, is listed on the Thai stock exchange, with institutions and retail investors holding a large portion of its equity.

The company clocked revenues of $406 million in 2004 and post-tax profit of $29 million.

Tata Steel's share price ended Thursday's trade on the BSE at Rs 368.40 (Rs 378.20).

Internal accruals to fund acquisition

TATA Steel will fund the Thai deal through internal accruals, said Mr T. Mukherjee, Deputy Managing Director, adding that the process will involve an open offer under Thai regulations for a critical part of the company's shares.

The Millennium Steel management on Thursday wrote to the Thailand Stock Exchange, informing that the move will depend on certain conditions. These include:

Its shareholders shall have adopted a valid and legally binding resolution to issue and offer 2,104,543,058 new shares, (representing 24.99 per cent of the paid-up base after the expanded capital) to Tata Steel on a private placement basis.

Its financial creditors shall have provided a waiver or consent to the transactions.

Its articles of association and its three subsidiaries (Siam Iron and Steel (2001) Co, Siam Construction and Steel Co and NTS. Steel Group Public Co) shall have been amended and registered with the Thai Ministry of Commerce to remove any foreign shareholding restriction.

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