Mittal is saying “Don’t worry, i will buy you guys later”
Corus employees, investors & CSN chief Benjamin are smiling all the way to the bank.
Tata is feeling the pinch. Ouch, it hurts. I thought it will be simple tooth decay, but turned out to be root canal.
I really wanted the title of the post to be “Tata won the battle of nerves”.
On the surface Tata did win the battle, but looking at the books, it is a big loss. The general perception was that Tata was going to make the Corus acquisition little harder and force CSN to pay a huge premium. At the end it turns out to be that CSN strategically withdrew from race forcing Tata to bite the nail. Ouch it hurts.
So the news is Tata buys steel giant Corus at $11.3 Billion. If one has to go by Indian media, this is a major international victory for India Inc and is the first expensive overseas acquisition by the Indian company. Only time can prove, if this was a victory or just an irrational exhuberance.
Corus was on the verge of bankruptcy just 4 years ago and was trading around 10 pence. The CEO steered it clear of Bankruptcy and sold money loosing operations and saved the company from shutting down. It has 40,000 employees and is expected to help Tata in serving the Western market.
Critics argue that Corus makes lot of sense to CSN rather than to Tata. However, Tata entered the scene first and was reluctant to withdraw after seeing CSN counter bid its offer. There were also rumours that Tata and Corus combined were going to make a bid on CSN once Tata completed its acquisition/merger of Corus. However, CSN surprised Tata and Corus by entering the fray and started counter bidding.
Tata now becomes Fifth largest Steel producer in the world with Corus acquisition. However, with surge in steel supply from China, global steel prices are going to come down in coming years. Overpaying Corus when global prices of steel are expected to come down would hurt Tata steel investors. It is my guess that Tata steel investors would run away awashing the recent gains made in the Tata steel stock.
Mittal is laughing, Benjamin is smiling and Tata is worried.
Will CSN bid for Tata and Corus few years from now? Or
Will Mittal eat all of them together? It will be interesting to watch.
It will be surprising if Tata went into takeover panel to win Corus. If yes, the Tata’s must definitely have something up their sleeves. If not, then it is anybody’s guess about Tata Steel’s future. Hope it remains a steel.