Mistry's 'frivolous' comment on Corus needs to be avoided, says former Tata Steel MD
Calling now former chairman of Tata Sons Cyrus Mistry's comment "frivolous" and "unconsidered" on the acquisition of Corus, B. Muthuraman, Former Vice Chairman and MD, Tata Steel, said that the acquisition decision was well thought out after a lot of deliberation to grow Tata Steel through capacity expansion in India and the Board of directors were deeply involved and approved the transactions.
Replying to Mistry's "one man's ego comment", Muthuraman said, "The overseas growth strategy was also to focus on accessing new markets through acquisitions, enhance the technology capability of the company and develop high end premium products".
"Following the successful acquisition of NatSteel in Singapore and Millennium Steel in Thailand, Corus Group plc provided a natural fit for the portfolio especially since the Netherlands facilities which is the gold standard in competitive positioning were part of the asset perimeter. The value of Corus increased since the initial bid in line with the commodity price boom, its underlying performance and the transaction process", he added.
Further, he mentioned that the acquisition was through a transparent auction process managed by the Takeover regulator in the UK and the acquisition price was 50 million pounds higher than the next bidder.
"In the first two years of the acquisition itself, Corus had an average annual EBIDTA of over 1 billion pounds which justified the reasonableness of the acquisition. The sudden and unprecedented scale of the global financial crisis in 2008 had a very significant adverse impact on the industry fundamentals in Europe which also impacted the performance of Corus", he concluded.
Muthuraman's comment came in after Mistry on Tuesday in a letter stated that, "It is common knowledge that the decision to acquire Corus for over $12 billion, when only a year earlier it was available at less than half that price, was based on one man’s ego and against the reservations of some board members and senior executives".
"The overpayment made it harder to invest in the acquired assets which had been neglected, and thereby, placed many jobs at risk", Mistry had said in the letter.
Soon after Muthuraman's comment, Tata Steel in a statement said, " the company strongly dismisses the unsubstantiated allegations being made against the company, its erstwhile board and management. The performance of Corus Plc post acquisition validated the strategy till the black swan event of the global financial crisis structurally impacted the underlying demand conditions in Europe causing financial hardship to the entire industry. As a responsible listed company, Tata Steel also made appropriate disclosures at various stages of the transaction to the regulators during years 2006 and 2007. These disclosures are available on the websites of the stock exchange".