The acquisition of Anglo-Dutch steel manufacturer Corus by India’s Tata group signifies a ‘coming of age’ of industrial corporations in developing countries. The fact that the two

final bidders for the European steelmaker were from Brazil and India indicates a discernible shift in the global economic power balance.

On the last day of January, after nine successive rounds of bidding in a closely-contested auction supervised by Britain’s ‘Takeover Panel’, Brazil’s Companhia Siderurgica Nacional (CSN) pulled out of the race in favour of the Tata group. With a production capacity of nearly 24 million tonnes, the Indian corporate group is now the world’s fifth largest steelmaking conglomerate after Mittal-Arcelor followed by Japan’s Nippon Steel and South Korea’s Posco.

In December, the Tata group had initially placed a $9.2 billion bid for controlling shares in Corus against a higher bid of $9.6 billion placed by CSN. During the open bidding process, the Tata group gradually increased its bids, finally settling for a figure of $11.3 billion. Investors in Tata Steel initially reacted negatively to the event and the price of the company’s shares actually fell on February 1. Tata’s chief Ratan Tata described the Corus acquisition as a “defining moment” in the group’s history that began more than a century ago when family patriarch Jamshetji Tata set up a steel plant in eastern India — then under British colonial rule.

With Corus in its fold, the Tata group has emerged as India’s largest privately-owned corporate enterprise. The group currently comprises nearly hundred corporate entities with a market capitalisation of $52 billion, an employee-strength of around 250,000 and operations in over 50 countries spanning six continents. The group’s revenues are equivalent to roughly 2.8 per cent of India’s gross domestic product (GDP). Before Corus, the group had acquired a controlling 30 per cent stake in the United States-based Energy Foods Inc., in August 2006, for a relatively small sum of $677 million.

The Tata group’s offer places an equity value of $12.1 billion for the Corus group and an enterprise value in excess of $13.6 billion. Tata Steel’s contribution to the bid will be around $4.1 billion while the rest of the funds would be provided by a consortium of international banks and financiers. Analysts believe the Corus deal is more than a landmark in Indian corporate history and quite unlike the acquisition of European steel giant Arcelor by Mittal Steel, since Mittal does not have investments in the country of his origin. “The Corus acquisition shows a maturing of the managerial and professional capabilities of Indian

corporate bodies,” Anjan Roy, economic adviser, Federation of Indian Chambers of Commerce and Industry, said.

The Tata group’s acquisition of Corus does not merely indicate that India Inc. is on a roll — the deal was crucial for the strategic, long-term survival of the group,” says Alam Srinivas, business editor, Outlook weekly.

He pointed out that Mittal-Arcelor and Posco of Korea intends setting up major steel making facilities in India in the near future as these corporate groups are attracted to India’s high-grade iron ore. “The Tata group has to become a global player to compete effectively against its rivals.” — IPS