Tata Steel(India) makes $7.6bn bid for Corus(U.K)
In the biggest overseas acquisition attempt by an Indian company, Tata Steel today said it was willing to offer $7.64 billion (around Rs 34,500 crore) in cash for buying Corus, which is UK’s largest steel company.
The “indicative, non-binding offer” to acquire 100% stake in Corus at 455 pence a share came exactly 12 days after Tata Steel had announced its interest in the foreign steel company. The offer which came through a “recommendary route” has put the enterprise value of Corus at $10 billion, Tata Steel said in a notice to stock exchanges.
A look at Tatas financials
Tata Steel can back its “non-binding” $7.6 billion offer for Corus with Rs 40,000 crore ($8.84 billion) worth of reserves that the group companies have on their books as on March 31, 2006.
Even if it raises the offer by another 15-20% and the cash outgo goes up to $8.8-$9.1 billion, the group has the financial muscle to handle it as it generates cash flow of over Rs 13,000 crore (close to $3 billion) every year. The collective market capitalisation of the Tata group’s listed companies is now over Rs 2,00,000 crore (about $45 billion).
Tata Sons, the holding company of the group alone has reserves of Rs 9,000 crore ($2 billion). It also holds 80% stake in the group’s IT flagship TCS, currently valued at Rs 80,000 crore (about $17.7 billion).
Tata Steel, which is eyeing Corus, has Rs 9,200 crore (over $2 billiion) worth reserves in its accounts. The company also generates cash flow of over Rs 4,000 crore ($900 million) every year.
The other group companies that have high reserves are TCS (Rs 5,560 crore/$1.2 billion), Tata Motors (Rs 5,128 crore/ over $1.1 billion), Tata Power (Rs 4,782 crore/over $1 billion), Tata Chemicals (Rs 1,953 crore/over $400 million), Indian Hotels (Rs 1,658 crore/about $375 million) and Tata Tea (Rs 1,083 crore/ over $220 million).
