Friday, December 16, 2005
Tata Steel to buy Thai company for $400 mn
Our Bureau / Kolkata December 16, 2005
Tata Steel has signed an agreement to buy Thailand's largest steel maker Millennium Steel for $ 400 million. This is inclusive of about $225 million debt Millennium has. The Thai steel maker has a capacity of 1.7 million tonne of steel annually across three manufacturing facilities. Tata Steel's production capacity is five million tonne.
Announcing the company's investment in the Thai company, B Muthuraman, managing director, Tata Steel said that the company had signed definitive agreements with the Cementhai Holding Company which has a 40 per cent equity stake in MS, to not only acquire its stake but also invest additional equity in MS subject to certain conditions.
MS was formed through a merger of three operating companies, the Siam Iron and Steel Company, The Siam Construction Steel Company and NTS Steel Group in 2002 having a capacity of producing 1.2 million tonne of steel per annum through the electric arc furnace route and a long products rolling capacity of 1.7 million tonne annually and was able to produce around a million tonne last year, Muthuraman outlined.
The current Thai steel market consumed 11-12 million tonne per year.
"We believe that this acquisition is in line with company's plans of global acquisitions and its rationale of expansion strategy and that post our acquisition and feeding semi finished and raw steel products to the plant, Tata Steel would be able to substantially improve the operations and would not rule out the possibility of scaling up operations sometime in the future," said Muthuraman.
The company's present investment and acquisition of NatSteel's steel business will significantly enhance its market position in south east Asia stressed Muthuraman.
Siam Cement Company is one of the largest business groups in Thailand with interest also in steel and had been looking out for a good buyer for MS to concentrate on its cement division, Muthuraman pointed out.
Tata Steel would be infusing $58 million which would lead to expanded equity of 30 per cent and might look at refinancing options in the long run and would be paying Cementhai $72 million for 25 per cent, explained Muthuraman stating that the process should be completed by March next year with shareholders approval and EGM.
There would be an open offer for the rest with the market price fixed at Baht 1.15 per share, he further added.
MS currently employs 800 to 900 people with revenues of $406 million and a profit after tax of $29 million and for the quarter ending September 30 2005 the company's revenue and net profit was $353 million and $11 million, respectively.
Tata Steel would be meeting government officials to negotiate gas price for its Bangladesh project next week.
Acquiring such finishing facilities in overseas market, specially developing ones combined with greenfield ones in India would help the company in achieving its target of 15 million tonne by 2010 and 25 to 30 million tonne by 2015, Muthuraman said.
On Bombay Stock Exchange, the Tata Steel stock today closed at Rs 368.40, down 2.59 per cent.
The Thai acquisition is part of Tata Steel's strategy to go global. Last year, the company acquired NatSteel Asia, a two-million tonne steel firm having facilities across seven countries for $ 486.4 million.
Last month, Tata Steel formed an equal joint venture with the Australian company BlueScope Steel to foray into the business of zinc and aluminium metallic coated steel, painted steel and roll-formed steel products in India and southeast Asia.
The JV is expected to set up Rs 900 crore production unit in Jamshedpur having an annual coating capacity of 2,50,000 tonne and paint line capacity of 1,50,000 tonne.
The company is now undertaking a 1.8 million tonne expansion plan at its Jamshedpur plant. Its capacity will go up to 10 million tonne by 2010.
Tata Steel has also plans for three greenfield steel plants totalling 23 million tonne capacity in eastern India. It also has plans to set up a six million tonne facility each in Iran and Bangladesh. --------------------------------------------------------
Going global
a.. Last year, Tata Steel acquired 2 mn tonne NatSteel Asia for $486.4 mn
a.. Last month, it formed an equal JV with BlueScope Steel of Australia to foray into zinc & aluminium metallic coated steel.
a.. The JV is expected to set up Rs 900 cr production unit in Jamshedpur