News: Tatas keen to maintain status quo at Corus

(TT 09/10/2006) London - If Tata Steel strikes a deal with British firm Corus, the Indian company would be keen to retain Corus’s management, including chief executive Philippe Varin. The Frenchman is credited with turning around the steel group since taking over in 2003, returning it to the black for the first time in five years.

Senior industry executives said Tata Steel might have to fight to keep Varin as he is already being wooed by rival groups, including mining firms Anglo American and Rio Tinto, both of which are seeking new chief executives.

A substantial shareholder in Corus — he owns close to 2 million shares — Varin would also be in line for a substantial payout in the event of a takeover.

Tata Steel could still face opposition to a bid. Severstal, the Russian mining firm which announced on Friday that it intended to list on the London Stock Exchange next month, is understood to be monitoring the situation.

But those close to Corus say Tata Steel remains the firm frontrunner.

Tata Steel is among a number of companies taking part in a visit to Britain this week by Prime Minister Manmohan Singh to boost trade relations between the two countries. The management of the two companies already know each other well and The Sunday Telegraph has learned that Corus chairman Jim Leng held unsuccessful talks with Tata group chairman Ratan Tata in July about a potential merger.

If successful, it would be the biggest Indian takeover of a foreign company and would be a remarkable coup for Tata. Last year, Tata Group generated revenues of $21.9 billion, the equivalent of about 2.8 per cent of the country’s GDP.

Any agreement would depend very much on price. Shares in Corus closed at 481 pence on Friday, valuing the company at £4.3 billion.

Analysts have suggested that Tata Steel would be reluctant to be seen to overpay for what is still seen as a high-cost operation. “Corus is a high-risk acquisition,” said one analyst. “The company has been looking for a buyer for some time but Tata will not want to over-pay.”

Tata Steel has lined up a $6.5-billion (£3.5 billion) financing package to help fund a £5-billion takeover of Corus.