India's Tata expands regional footprint via NatSteel buyout

India's Tata expands regional footprint via NatSteel buyout Martin Abbugao Agence France Presse/Singapore

India's Tata Iron and Steel Company Ltd. took a strategic step to expand its Asian footprint with the announcement on Monday it will buy the Asia-Pacific steel operations of Singapore's NatSteel Ltd.

The proposed deal involves Tata Steel taking over NatSteel Ltd.'s wholly-owned subsidiary, NatSteel Asia, for S$486.4 million (US$286.11 million).

The transaction is expected to be completed by Feb. 15, 2005.

When the deal is completed, Tata Steel will acquire NatSteel Asia's steel and related operations in China, Thailand, Vietnam, Malaysia, Indonesia, the Philippines and Australia.

NatSteel's Asia steel business, subsidiaries and assets in Singapore will be part of the transaction.

NatSteel Ltd. will retain its other businesses, which include chemicals, engineering, construction, property and investment.

Employees were informed of the deal just hours ahead of the announcement.

"It came as a shock to us, actually," a NatSteel employee told AFP.

Tata Steel Managing Director B. Muthuraman described the acquisition of NatSteel Asia as an "important step" in the company's plans to expand its business globally.

"NatSteel's steel business provides Tata Steel access to key Asian markets including China. I believe that the acquisition will prove to be a good strategic fit for Tata's steel business," he said in a statement issued here.

"I welcome members of NatSteel Asia's management team and all employees to the Tata Steel family."

Tata Steel is the largest private-sector steel company in India and is rated among the top four world-class steel companies.

It is part of the massive Tata industrial conglomerate, with some 80 firms involved in everything from cars and chemicals to information technology and hotels.

While the deal values NatSteel Asia at S$486.4 million , the actual payout could be around S$466 million after some adjustments are made, NatSteel said in a statement.

"Upon completion, Tata Steel will own 100 percent of NatSteel Asia, and will have acquired the company's steel businesses in Singapore and the region," the statement said.

NatSteel Ltd. chairman Cham Tao Soon said the Indian steel giant had made an "unsolicited offer", after which the NatSteel board appointed Goldman Sachs as its financial adviser to help evaluate the offer.

"After careful consideration, the board is pleased to support this transaction and recommend this for shareholders to consider," Cham said.

NatSteel Ltd. president Oo Soon Hee said that with Tata Steel's backing, NatSteel Asia "will be well-positioned to weather the volatilities in the steel industry because it will be part of a much larger, fully integrated steel group with extensive resources."

For NatSteel Ltd. the portion of its businesses being sold accounted for about 47 percent of profit before tax, minority interest and exceptional gains in 2003 and 52 percent of net asset value.

NatSteel Ltd. will use the proceeds of the sale to repay loans, further develop non-steel operations, pursue other growth opportunities and pay shareholders.