Tata Steel
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Tata Group's overseas takeovers
See graphic:
TATA's steel business in Europe
2017: alliance with ThyssenKrupp
A decade after its buyout of Corus, Tata Steel is scaling down its investment in Europe. Tata Steel and German group ThyssenKrupp have signed an agreement to combine their steel businesses in Europe in a bid to create the continent's second largest steel firm, after ArcelorMittal.
The new company , to be named ThyssenKrupp Tata Steel, will have an estimated turnover of 15 billion euros and will employ 48,000 people. The merger will help Tata Steel lower its debt burden as it will knock off 2.5 billion euros (Rs 17,000 crore) from its balance sheet. Tata Steel has a debt of Rs 75,000 crore.Both Tata Steel and ThyssenKrupp will hold equal stakes in the new company , which will have a capacity of 21million tonnes. The agreement comes more than a year after Tata Steel decided to explore a JV for its loss-making European business with the $46 billion ThyssenKrupp.Last week Tata Steel hived off its British pension scheme, which was an obstacle in its talks with ThyssenKrupp. Tata group chairman N Chandrasekaran said deal will allow the steel company to focus on domestic market and grow the business, through various channels, including acquisitions of stressed assets.
Tata Steel, under Ratan Tata's leadership, had entered the European market through the $13-billion acquisition of Corus in 2007. The buyout of Corus, rechristened as Tata Steel Europe, was the biggest M&A by an Indian corporate. However, the acquisition did not turn out to be profitable for Tata Steel. In March 2016, the company , then led by Cyrus Mistry , announced its exit from the British market because of continuous losses that forced it to write down over £2 billion.The new merger agreement will mark a major reduction in exposure for Tata Steel to the European market.
To be headquartered in Amsterdam, ThyssenKrupp Tata Steel will house both the companies' assets and liabilities. Tata Steel has plants in Ijmuiden (the Netherlands) and Port Talbot (the UK), while ThyssenKrupp has a unit in Duisburg (Germany). Tata Steel will shift 2.5 billion euros of debt to the proposed JV while ThyssenKrupp will transfer pension liabilities of 3.6 billion euros.
Tata Steel and ThyssenKrupp, which see cost savings of up to 600 million euros per annum from combining their businesses, hope to complete the deal by March 2019. Heinrich Hiesinger, chairman of ThyssenKrupp, said the merged entity will be in a better position to cope with the structural challenges in the European steel industry . The industry is affected due to overcapacity and dumping by Chinese companies. Post the merger, Tata Steel's stake in the new company will be recognised as an “income from investment“.
Tata Group's domestic takeovers
2018
Tatas buy Bhushan Steel
Reeba Zachariah, Leg up for IBC as Tatas buy Bhushan Steel, May 19, 2018: The Times of India
First Resolution Among 12 High-Profile Cases
Tata Steel said that it has completed the acquisition of Bhushan Steel even as it continues to fight a legal battle with the financially-troubled company’s original promoter.
The country’s second-largest private sector metal producer has paid Rs 35,200 crore to the creditors of Bhushan Steel for a 73% stake in the company, in what is seen as the conclusion of the first among a dozen high-profile cases that are being pushed for resolution under the new Insolvency & Bankruptcy Code (IBC).
The statement from Tata Steel came even as Bhushan Steel’s erstwhile owner Neeraj Singal has challenged the deal at the appellate tribunal and has sought a stay on the transfer of his 22% stake in the company. The matter is up for hearing on May 21. The completion of the acquisition puts the Singals out of the saddle from a company that had acquired the image of a perpetual loan defaulter that put up plants at a cost higher than the industry average.
The Tata-Bhushan deal drew immediate celebration from the government, which has forced banks and the RBI to use the new law that seeks time-bound resolution as part of a “clean-up drive” to rid Indian industry of loan defaulters. While cases ranging from Essar Steel and Bhushan Steel and Power to Binani Cement and Jaypee Associates are being fought across judicial forums, the government expects the successful resolution of Bhushan Steel to speed up a decision in other cases too.
“Fifty-three lenders, domestic and international, recover Rs 35,200 crores under IBC — 76% of the outstanding bad debt. The whole process completed in 270 days from admission in NCLT. Creditors to also get upside from a 12% equity stake now in strong hands,” financial services secretary Rajeev Kumar tweeted. Banks had a loan exposure of Rs 56,079 crore to Bhushan Steel.
Compared to the liquidation value of Rs 14,500 crore, the lenders had managed to realise a much higher value, said Piyush Goyal, who is officiating as finance minister while Arun Jaitley recuperates from a surgery. “For the first time, such a large loan resolution has been achieved through upfront payment received by banks through sale of a company,” he said.
Tata Steel to pay L&T ₹1,200 crore over a year
Goyal added, “This is a record step towards resolving the legacy of unprecedented amount of bad bank loans inherited by this government.” Goyal credited Prime Minister Narendra Modi and Jaitley for the insolvency resolution plan. He added that lower NPAs will make loans more affordable, especially for MSMEs.
Besides the Rs 35,200 crore, Tata Steel will be paying Rs 1,200 crore to Bhushan Steel’s operational creditors like Larsen & Toubro over a year. Recently, Larsen & Toubro had objected to the deal on the ground that Bhushan Steel owes it Rs 900 crore and wanted it to be treated on a par with financial creditors. But the court had dismissed its petition.
According to the arrangement between the financial creditors and Tata Steel, the former will hold 12% in Bhushan Steel after they convert a part of the debt into equity. Tata Steel has paid another Rs 100 crore to the financial creditors for “novation of remaining financial debt of Bhushan Steel”.
Tata Steel, which has routed the acquisition through its wholly owned subsidiary Bamnipal Steel, will finance the transaction through a mix of debt (Rs 16,500 crore) and equity (Rs 18,700 crore). Bhushan Steel is Tata Steel’s biggest acquisition since Corus in 2007.
While Electrosteel Steels was expected to be the first among the 12 bankruptcy cases to be resolved after potential buyer Vedanta got the tribunal’s nod, the unsuccessful bidder Renaissance Steel challenged Vedanta’s eligibility to take over the ailing company at the appellate tribunal and the case is listed for hearing on May 28.
