India's Tata Steel is set to become the world's fifth-biggest steelmaker after winning a bid battle for Anglo-Dutch steelmaker Corus Group by agreeing to pay 5.75 billion pounds ($11.3 billion).
Britain's Takeover Panel said in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash, topping a final bid of 603 pence from Brazilian Companhia Siderurgica Nacional (CSN).
Both offers were right at the top end of what analysts had thought possible and will now be put to Corus investors, who have no reason not to accept the higher price.
Corus was not immediately available for comment.
The auction process, following a takeover tussle that began in earnest when Tata Steel offered 455 pence per share on October 20, started at the close of trading in London on Tuesday when Corus shares ended 0.5 per cent higher at 563 pence.
CSN and Tata Steel were keen to buy Corus to Tata Steel wins Corus with $11.3 billion offer become significant players in the consolidating steel industry, where Dutch-based Mittal Steel last year bought Luxembourg's Arcelor to create the world's biggest steelmaker, Arcelor Mittal.
The 608 pence Tata Steel is set to pay values Corus at around seven times its forecast earnings before interest, tax, depreciation and amortization (EBITDA) for 2006, well above the multiple Mittal Steel paid for Arcelor which was 4.6 times historic EBITDA
Ahead of the auction, called last week by the Takeover Panel to bring the bid battle to an end, CSN had the upper hand after it had made a bid worth 4.9 billion pounds ($9.6 billion) or 515 pence per share, accepted by Corus on December 11, hours after it had accepted a 500 pence offer from Tata Steel.
The battle pushed Corus's share price to seven-year highs and pitted 70-year-old Tata group chairman Ratan Tata, from one of India's best-known business families, against Benjamin Steinbruch who at 52 is one of Brazil's most famous executives as chief executive and main owner of CSN.
Ratan Tata has transformed the once-staid Tata group since taking over as chairman in 1991. He has cut the number of companies in the group from over 300, and acquired new businesses with growth potential.
Tata Steel has spent more than $400 million in recent years to buy Singapore's NatSteel and Thailand's Millennium Steel, and other group companies have also made acquisitions outside India.
For CSN's part, its 603 pence offer marks the second time in five years it has failed to buy Corus.
In 2002, CSN openly held talks with Corus about a tie-up but ended up backing off because of concerns about the European company's financial health.
Steinbruch set his sights on Corus again last year after CSN lost out to Chicago-based steel services group Esmark in a showdown for US steelmaker Wheeling-Pittsburgh Corp.
On Tuesday, Tata Steel reported a 41 per cent jump in net third-quarter profit to 10.63 billion rupees.
Sterling, which has been nudging the $2 mark for several weeks, could get a boost from the deal as Tata Steel looks to buys pounds to pay Corus's British shareholders.
Deal worth premium: Ratan Tata
Tata Group Chairman Ratan Tata on Wednesday asserted that the Corus takeover cost would prove to be worthwhile, even though the group paid much higher than what it had started with.
Prices went up when investors came in and increased the price after Tata's preliminary bid of 455 pence a share and before it was challenged by Brazil's CSN, he told reporters.
"But we have to pay for getting the company... As a prudent management, we had taken a view that we would not go beyond a point... We did not reach that point... Had we reached, we would have walked away," Tata said.
He dismissed suggestions that the group had overbid for the acquisition of Corus, saying: "Overbidding or not is subjective when it comes to a judgement call."
Giving an analogy of real estate prices, he said what could have been considered a fair price two years back for a flat may not be the same now and added that steel company prices were only going up.
Tata Steel Vice President (Finance) Koushik Chatterjee said that the offer puts an equity value of 12.1 billion dollars and enterprise value of 13.65 dollars.
Tata Steel's contribution to the bid would be around 4.1 billion dollars, he said, adding that financiers remain the same.
'A moment of fulfilment'
Tata dubbed the victory as "a moment of fulfilment for India." "This will prove to be a visionary move...," Tata further said.
At the same time, he took a dig at the critics, saying: "When we launched the bid for Corus, many thought it was an audacious move, because an Indian company taking over an European company much larger in size has not happened before."
He said Tata Steel would become a global scale player with footprint in Europe to become "the fifth largest steelmaker in the world," while announcing that the present management would be retained and Corus would be integrated with Tata Steel.
This has demonstrated that Indian industry can step outside of India in the international market as a global player, he said.