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Tata Steel: No Decision On Riversdale Bid Yet

28 December, 2010

Tata Steel, the largest shareholder in Africa-focused miner Riversdale, has not yet decided whether to counter Rio Tinto’s $3.9 billion bid for the company, the Indian firm’s managing director said late Monday.

Speaking to reporters in Tata Steel’s hometown of Jamshedpur, Hemant Nerurkar said the company had no problem with Rio Tinto buying into Riversdale, adding that Tata Steel was happy to work with any company that assured it coal supply.

“We are not in Riversdale for financial incentive,” Nerurkar said. “We want to use coal and we are here to secure raw material for our Indian and European operations.”

Anglo-Australian miner Rio Tinto last week offered to buy Riversdale as it seeks to secure coking coal reserves sought after by steelmakers.

Tata Steel, the world’s seventh largest steelmaker, owns 24 percent in Riversdale and its director on the miner’s board has abstained from voting on the deal.

“We have no discomfort with Rio. This company (Riversdale) needs a strong management and Rio has good management,” Nerurkar said, but declined to comment on why the director abstained from a vote.

A rival Indian consortium of five state-run firms is also eyeing Riversdale, and last week hired Citigroup to conduct due diligence on the miner.

“If they are serious, they should make a bid,” Nerurkar said of the consortium.

The chairman of Coal India, one of the companies in the consortium, said last week it was not in formal talks with Tata Steel about a joint bid. But a source familiar with the company told Reuters the two sides were in talks to discuss either a joint bid or Tata supporting a bid by the consortium.

Coal India Chairman Partha Bhattacharyya said last week the consortium had a month to decide on a possible Riversdale bid.

Analysts in India have said Tata Steel should hold on to its stake in Riversdale to assure coal supplies for its Corus unit, which does not have any captive raw material supplies.

A debt of around $10 billion on its balance sheet limits its ability to make big investments, making a bid for the rest of Riverdale unlikely.

SCOUTING FOR ASSETS

India is expected to emerge as the third-largest consumer of steel in 2011, after China and the United States. An economy growing at nearly 9 percent is driving a construction boom in buildings and infrastructure, and prompting big investments by global automakers.

In July, Japan’s JFE Holdings said it would spend about $1 billion for a 14.9 percent stake in India’s third largest steelmaker JSW Steel Ltd.

State-run Steel Authority of India is also finalising plans to set up joint steel plants with South Korea’s POSCO and Japan’s Kobe Steel.

Nerurkar said Tata Steel is looking for raw material assets in Australia, Canada and South Africa as it races to meet demand and secure supplies of coal and iron.

Nerurkar also said the firm plans to invest $500 million in its European operations to improve supply chain and efficiency.

Tata Steel said last week it had received shareholder approval to raise 70 billion rupees ($1.5 billion). Nerurkar said on Monday that Tata Steel would decide the form of fundraising in three to four weeks and would raise the funds by March 2011.

The proceeds would be used mainly to cut debt, Nerurkar said.

Tata Steel bought Corus, Europe’s second-largest steelmaker, in 2007 for $13 billion, in the biggest overseas acquisition made by an Indian company so far.

The steelmaker has global capacity of around 30 million tonnes — two-thirds of which are from its European unit Corus, a quarter from its growing Indian operations and the rest from units and joint ventures in Thailand, Singapore, Vietnam and the Philippines.


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Tata Steel: No Decision On Riversdale Bid Yet

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