N. Chandrasekaran defends acquisition of Corus PLC by Tata Steel
While addressing shareholders at the company’s 110th annual general meeting, N. Chandrasekaran, Chairman, Tata Steel said that the acquisition of Corus PLC by Tata Steel in 2007 was part of the long-term strategy to grow business through international acquisitions.
Chandrasekaran said certain specific issues relating to past decisions of the company on acquisition of Corus and the company’s communication with the promoter, Tata Sons, were raised last fiscal. The international growth strategy was to focus on accessing new markets, sourcing raw materials, enhancing the technology capability and developing high-end premium products and Corus Group Plc provided a natural fit for the international portfolio, including the identified synergies.
Last November, Mistry accused former Chairman Ratan Tata of making the Corus acquisition an ‘ego’ issue and over-paid for acquiring the company. Mistry had said that some board members had reservations on Tata pushing for the acquisition of Corus for over $12 billion, as a year earlier it was available at half that price.
Denying the allegations on Tuesday, Chandrasekaran said the value of Corus has increased since the initial bid, in line with the commodity price boom, its underlying performance and the transaction process. In the first financial year after the acquisition, the EBITDA of Tata Steel UK, which was the SPV which acquired Corus, was pounds 1,038 million, compared to pounds 687 million in the previous year. However, the sudden and unprecedented scale of the global financial crisis in 2008 had a very significant negative impact on the industry fundamentals in Europe, which impacted the performance of Corus, he said.
The board was deeply involved in all the deliberations on Corus that took place over multiple board meetings and had approved the acquisition of Corus on a consensus basis, he said.
On the issue relating to the company’s communication with the promoters, Tata Sons, he said all such communications are normal business practice and are value enhancing for the company, based on the strategic support provided by the Tata Group to the company.
“As this issue was raised, our Audit Committee undertook a detailed review and has come to the conclusion that all of the company’s communications with Tata Sons were fully compliant with all applicable laws. It is now evident that such allegations were incorrect,” he said.