Almost nine years ago to the day, a clutch of steel executives gathered in the offices of City lawyers Slaughter and May and settled in for a long night.
The top brass at Corus, an Anglo-Dutch company that owned what was British Steel, were there to witness who would win the fight to be their new owner. After months of jostling between India's Tata Steel and Brazil's CSN, the takeover panel had decided to bring things to a head. There would be a shootout after the market closed, each side was allowed nine bids.
The battle went the distance, rising from a starting price of 515 pence a share to culminate in Tata's pre-dawn winning bid of 608 pence. Ratan Tata, chairman of Tata Steel and head of Tata, India's biggest business empire, monitored the deal from Mumbai, while Benjamin Steinbruch, head of CSN, oversaw the bidding from Brazil.
Tata's winning bid valued Corus at £6.7 billion, including debt, making it the most expensive deal in steel history on the earnings multiple paid. For a company whose shares had traded at just 19 pence four years earlier, it was a staggering price. And the Indians would have gone higher.
"At 608 pence, we hadn't reached the limit we had set ourselves," said Ratan Tata.
The deal made Tata the world's sixth-biggest steel maker, shooting from 7 million tonnes (mt) a year to almost 26mt. Combining Tata's Indian iron ore and coalmines and steel plants with Corus's factories in Britain and the Netherlands will build a global steel giant. It reckoned there was more growth to come. It could be making 40mt a year by 2012, putting it second only to ArcelorMittal and leapfrogging No. 2, Japan's Nippon Steel.
That did not happen. Instead, a cocktail of slumping global demand and fierce Chinese competition has forced Tata to spend the last few years unwinding that deal, and booking huge losses in the process.
A British workforce that stood at 24,000 at the time of the deal had shrunk to 17,000 by the end of last year. A further 1,050 jobs were axed last week. Further slimming is in the pipeline. Tata is in talks to sell the Scunthorpe-based long products unit, which employs about 4,000. If terms cannot be agreed with bidder Greybull Capital, Scunthorpe will close.
This inexorable retreat, speeded by a rise in cheap imports, has led many to question whether Britain, which led the world in steelmaking for more than a century, might lose the capability altogether.
Experts say it was unlikely that steel finishing - processing slab steel into railway tracks, construction girders and other products - would vanish. But the raw heart of the process - making iron, where ore is heated in giant furnaces with coke and reduced to molten metal - was under threat because of the UK's intractably high energy costs.
Tata's determination to buy Corus was in no small way influenced by the actions of another Indian businessman, Lakshmi Mittal.
A year earlier he had pounced on the continental champion, ArcelorMittal, Indian-born but living in London, had formed a titan more than three times the size of its nearest rival, Nippon. "Arcelor was trying to get into emerging markets. There was a possibility Tata could become a target for Arcelor," said Vishal Kulkarni, a credit analyst at Standard & Poor's (S&P).
Tata knew that to stay relevant in a rapidly evolving market, it needed to buy a sizeable foothold in Europe. "If they didn't do something, they'd get left behind," said an adviser who worked on the buyout.
China was growing fast, as were India and Russia, and Tata was banking on a commodities supercycle that showed no sign of ending.
Corus had been hacked into shape by boss Philippe Varin since it was formed from the merger of British Steel and Dutch rival Royal Hoogovens in 1999. Its integrated steelworks at Port Talbot in south Wales, Scunthorpe in north Lincolnshire and Ijmuiden in the Netherlands supplied "high value added" steels for car makers, building sites and rail networks. Corus was the perfect target.
Eight years on, Tata has achieved its goal of a foothold in European markets, albeit at a high price. But it is no longer counted among the world's top 10 steel makers. That list is increasingly populated by Chinese steel giants - Hebei, Baosteel, Shagang, Ansteel, Wuhan and Shougang.
Source: Telegraph India