The board of Tata Steel approves the merger of its seven subsidiaries –
The , , Indian Steel & Wire Products, Tata Steel Mining and S&T Mining into and with their parent companies .
The decision was taken at a company board meeting held yesterday, said an exchange filing.
The company has revoked the previous Tata Metallics and Tata Steel Long Products (TSPL) merger scheme.
Share exchange ratio under the merger scheme:
Tata Steel vs TRF: 17:10 (17 shares of Tata Steel for every 10 shares of TRF)
Tata Steel vs TSPL: 67:10 (67 shares of Tata Steel for every 10 shares of TSPL)
Tata Steel vs Tinplate: 33:10 (33 shares of Tata Steel for every 10 shares of Tinplate)
Tata Steel vs Tata Metallics: 79:10 (79 shares of Tata Steel for every 10 shares of Tata Metallics)
Explaining the rationale behind the merger scheme, Tata Steel said the resources of the entities being combined can be pooled to open opportunities to create value for shareholders.
Apart from mentioning other synergies, the merger will also result in more efficient utilization of each other’s facilities. The marketing and distribution networks of the two entities can be collaborated, he said.
“In line with the group-level 5S strategy – simplification, synergy, scale, sustainability and speed – the proposed scheme will simplify the group holding structure, increase agility to enable faster decision-making, eliminate administrative duplication, consequently reduce administration costs to maintain the operating entity.” separately,” said Tata Steel.
At ISWP, the steel company said the merger would ensure the creation of a combined entity, leading to a ‘One-Tata Steel’ in front of customers which would increase shareholder value of the combined entity.
The mega-merger plan will require shareholder approval from all seven companies as well as from Tata Steel, the regulatory body and the stock exchange.
“Tata Steel appears to be articulating the merger in their annual report. One of the advantages of the merger is that royalties are not required,” said Amit Dixit of Edelweiss Securities.
Under the leadership of N Chandrasekaran, the Tata Group is trying to consolidate its businesses which share the same synergy. Earlier this year, the group announced the merger of Tata Consumer and Tata Coffee. Media reports this week said that Tata is now planning to consolidate the airlines – Air Asia India and Vistara – under the Air India brand in 2024.
In response to the merger announcement, shares of Tata Steel rose about 4.1 percent even though Sensex lost more than 650 points in the early hours. Shares of the other four merger-bound listed companies traded lower during the day. TSPL was the hardest hit and eroded more than 9 percent of shareholder value while TRF and Tinplate traded lower by 5 percent each.
Tata Metallics was 3 per cent lower at Rs 776.