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Tata Steel unveils funding plans for Corus buyout
Staff Correspondent
| To issue rights shares in 1:5 ratio at Rs. 300 per share |
FUNDING METHODOLOGY: B. Muthuraman (right), Managing Director, Tata Steel, and Kaushik Chatterjee, Chief Financial Officer, at a press conference in Mumbai on Tuesday.
MUMBAI: Tata Steel has announced that its board on Tuesday approved a rights issue of equity shares to the shareholders in the ratio of 1:5 at a price of Rs. 300 per share (of Rs. 10 each), which would involve an issue of equity shares of aggregate face value of Rs. 122 crore and would provide an amount of Rs. 3,655 crore ($862 million).
As part of the long term financing pattern for the acquisition of Corus through its wholly owned indirect subsidiary Tata Steel UK, the company announced a simultaneous but un-linked rights issue of convertible preference shares in the ratio of 1:7 having a coupon rate of two per cent with conversion into equity shares after two years at a price in the range of Rs. 500 to Rs. 600 per share as may be determined at the time of the issue. This issue would provide a total amount of about Rs. 4,350 crore (about $1 billion). Tata Sons would stand-by to take up the unsubscribed portion of both issues in fulfilment of its support to Tata Steel for the Corus acquisition.
Foreign issue
The board also cleared a foreign issue of an equity-related instrument up to an amount of $500 million (about Rs. 2,100 crore, including premium). This issue would be made on an ex-right basis and on terms as may be determined at the time of the issue.
Kaushik Chatterjee, Chief Financial Officer, Tata Steel, said, the process for the rights issue had started and would be completed in the next three to four months. Tata Steel will be utilising additional debt of only $500 million (about Rs. 2,170 crore), which represents only 12 per cent of the total amount required.
As earlier announced, the net acquisition cost of Corus of $12.9 billion will be financed through equity capital of $4.1 billion from Tata Steel, which will be invested through Tata Steel UK, long term non-recourse debt financing from a consortium of banks amounting to $6.14 billion, quasi-equity funding at Tata Steel Asia Singapore, amounting to $1.25 billion, and Long term capital funding at Tata Steel Asia, Singapore, amounting to $1.41 billion.
Addressing the media, B. Muthuraman, Managing Director, Tata Steel, said, "We have started the integration process with Corus by forming15-18 synergy teams between the two companies. These teams will also work on long term strategic issues and by end-May we will have come closer to a conclusion on the specific areas of synergy. I sincerely believe that the synergy potential per annum will be more than the earlier indicated figure of $350 million.''
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