Tata Steel sews up NatSteel buyout

Rs 810 cr paid, balance to be paid after china unit acquisition

Tata Steel today completed the acquisition of Singapore's largest steel company, NatSteel Asia, which has operations across seven markets "" Singapore, Thailand, China, Malaysia, Vietnam, the Philippines and Australia.

With this acquisition, Tata Steel's consolidated capacity will rise to 6 million tonne per annum from the current 4 million tonne per annum. Once the capacity expansion plan in Jamshedpur is completed in March, the consolidated capacity will go up to 7 million tonne.

Tata Steel had signed a definitive share subscription agreement with NatSteel Ltd on August 16, 2004, to acquire the latter's steel businesses in an all cash deal.

As part of the agreement, all the steel assets of NatSteel Ltd in Singapore, Malaysia, Thailand, Vietnam, Phillipines, Australia and China were to be transferred to NatSteel Asia.

While all the businesses of NatSteel have been transferred successfully, the transfer of one of NatSteel's three companies in China "" Changzhou Wujin NatSteel Company "" is delayed due to the pending regulatory approval.

As per the deal, the enterprise value of NatSteel Asia is pegged at (Singapore dollar) $486.4 million ($283.1 million or Rs 1,313 crore). The enterprise value includes the value of NatSteel Asia's equity "" S$364.8 million (approximately $214 million or Rs 985 crore) "" and its debt and working capital.

Koushik Chatterjee, vice-president "" finance, Tata Steel, told Business Standard from Singapore, "Due to some delay in regulatory approvals, Changzhou Wujin has not been transferred to NatSteel Asia. We expect that these approvals should be in place by April. Therefore, we have paid S$304.8 million (approximately $176 million or Rs 810 crore) and the balance S$60 million (approximately $35 million or Rs 160 crore) will be paid, once the Chinese steel company becomes a part of NatSteel Asia."

Tata Steel has signed a supplemental subscription agreement with the parent company NatSteel for this.

The acquisition is completely funded through internal accruals, Chatterjee added.

B Muthuraman, managing director of Tata Steel will be the non-executive chairman of NatSteel Asia, while Oo Soon Hee (the then president and chief executive officer of NatSteel) has been inducted as the company's managing director.

The other members of the board include T Mukherjee, deputy managing director of Tata Steel, and Koushik Chatterjee.

The acquisition also includes a 26 per cent equity interest owned by NatSteel in Southern Steel Berhad, a 1.3 million tonne steel company in Malaysia.

Tata Steel will supply semi-finished steel and billets to all NatSteel manufacturing facilities. At the time of signing the agreement in August, Muthuraman had said, "NatSteel sources scrap for producing its products. However, we will be now supplying semis to NatSteel from Tata Steel's existing resources in India."