Thousands of UK steel workers were seeking assurances over their jobs tonight after the Corus group agreed to a £4.3bn (€6.42bn) takeover by Indian rival Tata Steel.
The Corus board backed a 455p a share bid from Tata, having previously held talks with potential buyers in Brazil and Russia during a year-long search for a partner.
The proposed deal with Tata – part of the Tata Group which also owns companies such as Tetley Tea – will create the fifth largest steel company in the world and open up fresh opportunities for Corus in the rapidly expanding Asian market.
It will also transfer UK steel plants to Indian ownership less than a decade after British Steel merged with Dutch rival Hoogovens to create Corus in 1999.
Corus and Tata today both refused to rule out job cuts despite calls from unions and politicians for assurances.
Corus employs 47,300 people worldwide, including 24,000 in the UK at sites including Port Talbot, Scunthorpe and Rotherham.
Tata Steel managing director B Muthuraman said: “The way I see this is that the threat to jobs is very high if this deal does not take place.
“The security of jobs and the creation of more jobs is actually better if you are more competitive, and that is what this deal does.”
Corus chief executive Philippe Varin insisted there were no short-term plans to close sites in the UK.
“The future of any plant is not linked to this deal,” he said. “It is linked to the competitiveness of the plant.”
However, Transport & General Workers Union national secretary for manufacturing John Rowse said: “The assurances on jobs look very brittle at the moment.”
Michael Leahy, general secretary of steel workers’ union Community, added: “We would expect the Government to make clear that it wishes Tata to maintain UK steel-making capacity.”
The combination of Corus and Tata will create the fifth largest steel maker in the world with production of 23.5 million tonnes a year.
Tata said it will look for further opportunities for growth as it strives to increase output to more than 40 million tonnes of steel a year – putting it ahead of world number two Nippon Steel. The biggest producer in the world is Arcelor Mittal, with output of more than 110 million tonnes.
The proposed takeover of Corus, which requires shareholder approval, will be the biggest ever foreign acquisition by an Indian company if it goes through.
The offer price of 455p a share was below last night’s closing price of 478.5p and well below the 580p analysts hoped Corus would fetch when Tata revealed its interest earlier this month.
Analysts now expect a counter-bid to be launched, possibly from Russian giant Severstal, and shares in Corus remained above Tata’s offer price today.
Paul Caldwell, equity analyst at Barclays Wealth, said: “The shares have been trading ahead of this, anticipating other bids from Russian steel makers, while press reports suggest that there may be interest from Brazil. Consequently, the Corus share price is ahead of the offer price.”
If Corus accepts a counter-bid from a rival suitor it will have to pay Tata a break fee of £43 million.
Corus has been under pressure to link up with a low-cost rival as rising raw material and energy costs in the UK and the Netherlands chipped away at profits.
The need to consolidate became greater with the takeover of Arcelor by Mittal Steel earlier this year to create the global powerhouse.
Corus today said the Tata offer represented “substantial value” for its shareholders, with the 455p a share price 26.2% higher than the average share price over the last 12 months.
It came after a three-year turnaround programme at Corus called Restoring Success, which turned years of heavy losses into profits.
Corus chairman Jim Leng said: “In the middle of last year, my board agreed a strategic way forward for Corus to seek access to low-cost production and high-growth markets.
“Consistent with this, the company has held talks with a number of parties from Brazil, Russia and India. This transaction represents the culmination of these talks.
“This combination with Tata, for Corus shareholders and employees alike, represents the right partner at the right time at the right price and on the right terms.”