Industrial conglomerate Tata Group is unlikely to rest on its laurels after it acquires Corus Group. Find out who may be its next target.
Anyone who has been following the Indian market will not have been too surprised by Tata Steel's designs on Corus Group
(LSE: CS.)
. Formerly known as Tata Iron & Steel, or TISCO, the company already has steel interests in huge swathes of South-East Asia, Iran, Australia and South Africa. So, an acquisition of Corus will be just another step towards the company's stated global aspirations.
However, Tata may have to raise its £4b offer for Corus amid reports that Russian and Brazilian steelmakers may be interested, too. Some pundits reckon that it may have to lift its offer from 455p to as much as 580p a share, which will value the Anglo-Dutch steel maker at £5b.
But the lofty price tag is unlikely to deter Tata too much. The Corus acquisition will provide it with an important foothold in the European carbon steel market -- not that its domestic market is stagnating.
According to Tata, demand for steel in India may grow faster than the rate at which the economy is expanding. This suggests that demand for steel may grow at over 11% a year. Consequently, the company has earmarked over £5b to expand its steel manufacturing capacity in India, and a similar amount for acquiring overseas assets according to Aaron Chaze in his book "India --An Investor's Guide to the Next Economic Superpower".
Chaze also asserts that Tata is rapidly securing coal from outside the country mainly by buying stakes in Australian coal mines. It seems that the expansion of Indian steel companies, which include Steel Authority of India and JSW, is placing huge pressure on the Indian coal industry. The fear is that Indian coal miners will not be able to cope!
Interestingly, Tata is one of the best examples of strategic integration at work. Backward integration means that it gets all of its iron ore and two-thirds of its coal from its own mines and collieries, which helps to keep down costs -- at $200 a ton it is one of the world's lowest cost producers.
Significantly for investors, Tata's global ambitions may bring European collieries into play at a time when coal is staging a dramatic comeback as a viable source of energy generation. So could ATH Resources
(LSE: ATH)
, Britain's third biggest coal miner, be on Tata's radar screen? I wouldn't bet against it.
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