India's Tata Steel is examining the books of European steelmaker Corus PLC to decide on whether to make a formal takeover bid, an official familiar with the matter said Wednesday, a day after the two companies said they were discussing the matter.
Meanwhile, credit rating agency Standard & Poor's warned that the move involved financial risks for Tata Iron and Steel Company Ltd., popularly known as Tata Steel. Brokerage firms said a potential deal could stretch the company's resources and advised investors to be cautious while buying its shares.
Tata Steel and Corus issued separate statements Tuesday saying Tata had made a preliminary approach to pay $7.6 billion for the Anglo-Dutch steelmaker.
But both companies said that "there can be no certainty that an offer will be made."
There has been some discussion in the press about whether an offer price of $7.6 billion would be enough to secure the purchase of Corus, and whether Tata (who produce only a quarter of the steel made by the Corus Group), might be reaching too far with such a bid.
Following earlier interest in Corus shown by Severstahl, and Corus's far from negative reaction to takeover rumours, it seems almost inevitable that Corus will be joined with another world player before too long. The reaction of Corus to the news coverage is in stark contrast to that earlier this year of Arcelor, who tried everything to escape the clutches of Mittal, albeit in vain.
I always felt that India was soon to emerge as a major player in the steel industry, but never thought for one moment that acquisition would be the key to that growth.