February 28, 2007 | Businessworld

The man who bought Corus

The street perception is that the Tatas have paid too much. Analysts are concerned about the industry’s cyclical nature and its impact on future earnings. How would you view the deal price in case of an adverse turn in the business cycle?

Globally, the steel industry is witnessing consolidation and changes in the traditional business model. Instead of moving large quantities of iron ore, companies are now moving efficient material which is steel based (de-integrated production). We took into account possible steel price change, and geographical and product mix possibilities while bidding. We are optimistic that we can extract benefits from the acquisition in different scenarios.

How far were you prepared to go considering the strategic advantages that Corus offers?

I think at this point of time, in the steel industry, the business cycle has been better. We had taken a view that we would not go beyond a point of prudence and we did not reach that limit. The price has been higher than what it was when we started, owing to circumstances that existed. We believe that the price today will, looking back in time, prove to be one that was worthwhile because the price of steel companies in the coming year will likely be even higher.

What are your plans on supply of raw materials to Corus?

We plan to improve Corus’s profitability and operational efficiencies; adopt a philosophy of de-integrated production. We expect significant synergies.

Are you interested in acquiring iron ore assets overseas?

We will look at all possible opportunities in line with the company’s strategic direction.

Directionally, do you see any changes for Tata Steel from being a low cost steel maker?

The combined entity will emerge as the second-most geographically diversified steel company. It will have access to high value-added product mix and strong market positions in automotive, construction and packaging. The combine will be the second largest tin-plate maker in the world. Of course, there is a great amount of cultural fit between the two companies, which is, perhaps, the most important thing in any post-acquisition integration process between two large companies.

Could you shed light on the potential financing options for the $8 billion debt to be garnered from banks aside from the Tatas’ commitment of $4.1 billion to the SPV?

Tata Steel is working on the funding structure and financing options; the same will be announced at an appropriate time.

Does the plan include fund-raising through ADRs from group companies?

It is too premature to comment on the same.

Would the new business model of the two companies necessitate a rationalisation of the workforce?

Any new change involves a certain amount of apprehension. This acquisition is about making an entity more competitive so that jobs can also be secured better. We are not a company that looks at jobs first. We would first try and improve the productivity and output with the same number of people. It is important for us to get the respect of people, raise their motivation and strengthen the partnership.

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