Written - Corus Shareholders’ Approval Of Tata Takeover Offer On 7 March 2007

On 7 March the shareholders of Corus voted in favour of Tata Steel offer to acquire Corus Group. On 24 October in an Oral Statement to the Assembly I said I would make a further statement about the takeover once matters have reached conclusion. Although the due process will take a further month or so to complete, I believe a statement now would be useful to inform Assembly Members with interests in this issue.

It is useful to reflect on why the Tata acquisition came about. In August 2005 Corus announced that it would look at ‘external opportunities in low cost and high growth countries to further improve its competitive position’. One key reason for this was that steel markets in recent years have becoming increasingly global and world producers have integrated.  Corus needed access to new, developing markets. It also required good reliable and affordable sources of raw materials, including coking coal and iron ore, to remain competitive in world markets.  

During this time Corus held talks with a number of parties, including Brazil’s CSN, which played a major part in the recent bidding process for Corus. There was also much speculation on a hostile bid for Corus being made that could have resulted in serious consequences for the Corus Group, which at that time had only just started making a profit.

On 17 October 2006 Tata Steel approached Corus with a proposal for a purchase offer of 455p per share. CSN made a counter bid in November, and both CSN and Tata made a number of further offers until the UK Takeover Panel gave both bidders until January 30 to further modify their bids. Tata Steel’s winning bid for Corus of 608p in cash per Corus Share valuing Corus, according to Tata’s revised scheme document, at approximately £6.2 bn, was approved by Corus shareholders on 7 March.

The due process is expected to be completed by 2 April, at which time a joint Strategic and Integration Committee will be formed to take the business forward. I understand that at the same time the two Boards will combine, with a strong Corus presence – I understand Corus Chairman Jim Leng will become Deputy Chairman of Tata Steel under Mr Ratan Tata. Corus CEO Philippe Varin will also be invited onto the Board with the intention to appoint him as Deputy MD after one year.

Other current Corus Board members will also be invited to the new Board. Corus will become a subsidiary of Tata Steel, but I understand the Corus name will stay for the foreseeable future.

Tata’s takeover has of course raised concerns for the future from Corus’ employees and all those associated with its operations. In Wales there have been concerns about the long term future of Port Talbot’s steel making operations. This is because Tata has indicated it plans to expand its Indian steel making operations in the medium term and has said there may be a future option to supply slab from India for finishing in the European mills.

This remains one of a number of options in the medium term, but the forecast growth of demand for steel in India and South East Asia over the next decade may well see much of Tata’s future production being taken up by these markets. Tata has said there are no present plans to cut jobs or change the location of Corus’ main businesses.  

Port Talbot has in recent years received investment of over £300 million in the last 5 years to increase liquid steel production up to 5 million tonnes per year. The new Blast Furnace No 5, an additional caster, and a complete refurbishment of the coke ovens and coal injection plant have meant that the
Port Talbot Works now incorporates the latest steelmaking technology and is now successfully in production. This is complemented by an excellent workforce that continues to find ways of improving plant efficiency to further reduce the cost per tonne of steel.

The First Minister will be meeting Tata Steel MD Mr B Muthuraman here in Wales on 4 April, shortly after the completion of the acquisition process, at which he will extend a warm welcome and highlight the role that steelmaking continues to play in the Welsh economy.

He will also emphasise the strengths of the Welsh operations, and of the many qualities of Corus’ operations at sites throughout Wales, including Trostre, Shotton and Llanwern, as well as a large number of smaller manufacturing and other business units throughout Wales.  He will extend an open invitation to meet with him again when he returns to the UK.

I remain optimistic that the deal will be in Corus’ best interest. The early signs are very positive.

Of course, Tata cannot guarantee absolute job security. However, we should remember that Corus has never been in a position to do that. But I believe we should look forward positively, and trust that the Tata values that have made it
one of the best and most respected company names in Indian business will be carried over in its European operations.

These are still early days in the takeover process. At least the uncertainty is now over and we know Corus has a new owner in Tata Steel.  We are greatly encouraged by Tata’s initial comments; we look forward to working together to ensure that the strong steel making traditions in Wales can continue.

Meanwhile we remain in close contact with both companies, as well as with the UK Government and the Trades Unions.