Tata - Corus: Visionary deal or costly blunder?

Is the Corus acquisition by Tata Steel a defining moment for the company as made out to be? Or is it a disaster in the making for Tata Steel? By Rex Mathew.

After four months of twists and turns, Tata Steel has won the race to acquire Corus Group. The bidding war between Tata Steel and Brazilian company CSN was riveting and ended in a rapid-fire auction. Initial reactions to the deal are highly diverse and retail investors are completely puzzled by the market reaction.

Going by the stock market reaction yesterday, the acquisition is a big blunder. The stock tanked 10.5 per cent after the deal was announced and another 1.6 per cent today. Investors are worried about the financial risks of such a costly deal.

Media reaction to the deal has been just the opposite. Almost all the reports were adulatory while editorials praised the coming of age of Indian industry. A prominent financial daily presented the deal almost as revenge of the natives against the old colonial masters with a picture of London covered in our national colours.

Its editorial warned the market 'not to bet against Tata', citing the previous instances when sceptics were proved wrong by the group. Official reaction has been no different and the finance minister even offered all possible help to the Tata Group.

Is the acquisition too costly for Tata Steel? Is price the only criterion while evaluating an acquisition? Should managers focus on keeping shareholders happy after every quarter or should they focus on the long-term, big picture? These are tough questions and, unfortunately, answers would be clear only after many years - at least in this case.