Now for the hard part

1 February 2007 By Taron Wade

The Indian steelmaker has done the easy part winning the auction for its larger rival. Now it has to make the highly leveraged deal work. A total rethink of operations comes first. Then there will be some new equity, and a hope that the steel cycle does not turn down too soon.

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Tata Steel is buying Corus with a board recommended 608p per share offer, valuing the AngloDutch steelmaker at £6.7bn, including debt. Tata beat Brazil's Companhia Siderurgica Nacional (CSN) in an auction that went nine rounds into the early hours of January 31. CSN's final bid was 603p.

The financing structure of the allcash deal has not been announced. But the equitydebt split is expected to be roughly the same as the financing package announced when Tata made its first approach to Corus. Equity should fund about 35% of the bid.

Corus chairman Jim Leng and chief executive Philippe Varin will be directors of the new Tata Steel. Also, Varin and finance director, David Lloyd, have signed on to stay for a minimum of two years, with 12month notice periods.

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