It's official: Tata Steel buys Thai co for $404m
The Economic Times— December 16, 2005

Tata Steel, on Thursday, announced the acquisition of Thailand-based Millennium Steel (MSC) in a deal valued at $404m. ET had reported in its Thursday edition that the deal, amounting to $400m, will be announced on December 15. The equity value of MSC is approximately $175m, while the company's debt has been valued at $229m. Tata Steel, the largest steel manufacturer in India in the private sector, informed the BSE that it has signed an agreement with Cementhai Holding Company, which is a Siam Cement Group Company, to acquire approximately 40% of the former's holding in MSC for $73m.

According to the terms of the agreement, Tata Steel has to purchase an additional 24.9% for approximately $60m by fresh issue of equity shares in MSC, subject to shareholders' approval. The company will also make an open offer to the shareholders of MSC. Tata Steel shares were down 2.6% at Rs 368.4 on the BSE on Thursday. While Tata Steel will first acquire 40% from Cementhai Holding Company, its equity holding in the company will increase to 55% of the enlarged equity after infusing the additional 24.9%, giving the company a majority stake in MSC.

Following the equity infusion, the company will make an open offer for the remaining 45% as Thai regulations require the acquirer to make an open offer for the entire remaining holding, unlike 20% as per Sebi takeover guidelines. Standard Chartered Bank was the exclusive financial advisor to Tata Steel on the transaction. White & Case, Bangkok and AZB & Partners, Mumbai, were the legal advisers to the transaction, while Deloitte & Touche Bangkok were the accountants to the transaction.

MSC was formed through a merger of three operating companies - The Siam Iron and Steel Company, The Siam Construction Steel Company and NTS Steel Group - in '02, and is now the dominant steel producer in Thailand. The company is listed on the stock exchange of Thailand and is owned 40% by Cementhai Holding Company, while the remaining stake is held by institutional and retail investors. The three operating units of the company have a cumulative capacity to produce 1.2m tonnes of steel per annum through the electric arc furnace route and a long products rolling capacity of 1.7m tonnes a year.

For '04, MSC had revenues of $406m and a profit after tax of $29m. For the nine months ended September 30, '05, the company's revenues and net profit was $353m and $11m respectively. The acquisition of MSC is a significant step in Tata Steel's globalisation initiatives and together with the earlier acquisition of Nat-Steel's steel business, will significantly enhance its market position in South-East Asia. The company stated in a release that the acquisition will fit in with Tata Steel's strategic expansion plans and is likely to result in significant synergy benefits in the future.