Tata Steel Approves Merger Of Seven Subsidiaries With Itself
Tata Steel announces share swap ratios at which it will subsume seven of its subsidiaries. Their stock prices, however, fell.
The board of Tata Steel Ltd. has approved the merger of seven of its subsidiaries with itself, in a move that will simplify the structure of the steelmaker and achieve better facility utilisation.
The Jamshedpur-based steelmaker has approved the amalgamation of the following companies with itself:
Tata Steel Long Products
Tinplate Company of India
The Indian Steel & Wire Products
Tata Steel Mining
S&T Mining Company
Each scheme of merger is subject to the approval of shareholders, the Securities and Exchange Board of India, the stock exchanges, and other statutory bodies, Tata Steel said in a late-night filing on Thursday.
Share Swap Ratios
Tata Steel Long Products: 67 shares of Tata Steel for every 10 held
Tin Plate Company: 33 shares of Tata Steel for every 10 held
Tata Metaliks: 79 shares of Tata Steel for every 10 held
TRF: 17 shares of Tata Steel for every 10 shares held
Indian Steel & Wire Products: Rs 426 for every share held
Tata Steel Mining: No share issuance
S&T Mining Company: No share issuance
The Tata Steel merger is aimed at better operational integration and facility utilisation, as well as a simplified structure for greater efficiency, faster execution and rationalisation of logistics cost, the filing stated.
A combined entity will lead to ‘One-Tata Steel’ culture in front of customers, "which will improve shareholder value". "Further, such restructuring will lead to simplification of group structure by eliminating multiple companies in similar business."
The merger could also result in improvement in raw material security for the companies. "Iron ore sourced from the mines of the companies can be blended appropriately which can enhance overall life of mines of the combined entities."
In a similar exercise earlier this year, the Tata Group had merged the consumer products business of Tata Chemicals Ltd. with Tata Global Beverages to form Tata Consumer Products Ltd.
Implications Of The Share Swap
Shares of various companies involved in the scheme of amalgamations reacted on Friday. While Tata Steel gained as much as 4.1%, Tata Steel Long Products lost over 13% intraday. Shares of Tinplate Co. of India lost over 7.5%. Tata Metaliks fell nearly 5.9% and TRF shed 5.3%.
(Corrects an earlier version that erroneously calculated arbitrage for Tata Steel in the chart.)