Mittal 2- TATA 0?
L.N.Mittal is continuing from where he left. The steel king has now taken over a Mexican steel company called Sicartsa for $1.4 billion. Here's a comparitive analysis of the bid for Corus by the TATA's vs Mittal's latest offer to Sicartsa:
|Capacity (million tonnes)||18.2||2.7|
|Revenues (million dollars)||9200('06)||956 ('04)|
|EBITDA (million dollars)||520('06)||248('04)|
|Price offered/installed capacity ($)||527.47||518.51|
It doesn't take much to figure out that the TATA's are paying a high price for Corus. Although they are paying only a marginally higher $527 per installed tonne vs $518 which the Mittals are paying for Sicartsa,we must remember that Sicartsa seems to be a highly profitable operation by all accounts, especially when compared with CORUS. I won't be surprised if it is the pension costs that are pulling down profitability of CORUS considering the size of its work force and the demographic profile of its workers. That fits in with why CORUS has made pension compensation guarantees such a major point in its sale discussions with TATA.Unfortunately, EV/EBITDA value in the Sicartsa deal is not readily available to compare it with the CORUS 6.2 times offer.
And TATA's have not even clinched the deal yet! By all accounts they would have to bid at least $10 billion to ward of another bidder viz.,CSN. That makes the bid even more expensive. No wonder the TATA Steel share price (listed in India) has tanked since the announcement of the bid for Corus.
The Mittal Arcelor deal was a share swap offer, ensuring Mittal steel did not have to bleed cash. TATA's, on the other hand are being asked to put ALL the cash on the table before being handed over the keys!
Most importantly there is a clear case for the Sicartsa acquisition with its plant and Mittal's own plant operating almost side by side. TATA's are , however, struggling to make a case for the strategic fit in buying CORUS, given that the Indian Govt. has restrictive controls on exporting Iron Ore out of India to be used in CORUS's mills in Europe and the fact that TATA's have committed that they won't lay off workers en masse' and keep production going like it is now, at least for a few more years.
All in all, it seems that after the Arcelor deal, this is the second deal where Mittal has shown his smarts. Mittal 2- TATA 0 ?
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