Business Daily from THE HINDU group of publications
Tuesday, Dec 12, 2006
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Business Daily from THE HINDU group of publications Tuesday, Dec 12, 2006 ePaper |
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Markets
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Stocks Corporate - Mergers & Acquisitions
Our Bureau
Mumbai , Dec. 11 Tata Steel shares tumbled to an intra-day low of Rs 438 on concerns over the Tata Steel-CSN price war for control of the Anglo-Dutch steel maker Corus. The stock of Tata Steel ended the day 6 per cent weaker at Rs 453.40 on the BSE on Monday. Total traded shares at the counter stood at 44.42 lakh against the two-week average of 12.65 lakh. Even as Tata Steel announced a revised bid of 500 pence per Corus share on Monday, Brazil's CSN, made a fresh 515 pence-a-share cash bid for Corus Group. The revised Tata Steel bid, which is 10 per cent higher than its original offer, reportedly puts the enterprise value of Europe's second largest steelmaker - Corus at GBP 5.7 billion ($ 11.1 billion), including debt. Tata Steel is said to be considering its position and is expected to make another announcement in due course. According to market participants, lack of clarity on the issue has impacted sentiment at this counter. "Today's fall is primarily due to concerns over the cash outgo. The debt overhang on the consolidated EBITDA margins of Tata Steel will be considerable. This is, in part, due to the fact that the company is currently going through capacity expansion and it will have to divert some of the money to the Corus deal," said Mr Harender Kumar, Head of Research, ICICI Direct. While strategically a good deal in the long term, Mr Kumar said that it would impact Tata Steel's insofar zero debt, high margin business profile. Tata Steel's acquisition of Corus will make the merged entity the world's fifth-biggest steel producer, with an output of about 23 million tonnes a year. Tata Steel produced more than five million tonne in 2005-06, while Corus produced around 18 million tonne. Tata Steel is already one of the lowest cost producers of steel in the world.
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