When a company talks about laying out $11 billion in cash you have to take note. In this case it’s Tata Steel's decision to buy the Anglo-Dutch steelmaker Corus after beating out rival Brazilian bidder CSN. The price looked a little on the steep side. When Tata’s share price drops and Corus’ rallies you know the market has already voted with its feet on the valuation. It is down to Tata now to wring out the value they perceive. That will take time and patience.
But analyzing this story from a pure investor standpoint diminishes its broader significance.
What is interesting is how the deal is being celebrated at home. The Tatas are being hailed as conquering heroes, Ratan Tata in particular is being lauded for his insight. I hope the Hindustan Times won’t mind me repeating some of the feedback they recorded on their pages from a reader, it is typical of many other supportive remarks:
"This takeover will help improve India's standing in the world as an emerging economic giant. The West will take India more seriously and understand its importance in the changing global scenario. Indians will be recognised in the world stage for their endurance and fighting spirit. Three cheers to Tatas, congratulations!"
What struck me is how different this coverage is to the reception business deals get in Europe. I don’t remember ever seeing any CEO, or business family, being saluted for a takeover or smart strategic manoeuvre in quite this way. As a business journalist I must admit I am heartened to see so much passion aroused by a business story.
Indians will tell you Tata is an institution, it is more than a business success story -- the Tatas are the cornerstone of Indian industry.
The 47,000 employees of Corus will now work for an Indian owner. That shouldn’t matter to them, and it shouldn’t matter to shareholders of the new business. As long as the business is effectively run and continues to create value all well and good.
Ratan Tata and the family must now seize on this takeover as a platform to claim their place on the global business stage. I hope this won’t sound disrespectful, but Indian companies have yet to claim the recognition and attention they deserve. Outside of India they have always seemed more focused on the back office rather than the front office -- it is time to grasp that challenge.
The names of Indian, and Chinese companies for that matter, are still a long way from becoming household names in the markets they already service or sell into. That is a shame, and surely it will change.
As always, feel free to send feedback on this blog or other topics here.
A Reader Responds:
"The reason why you see such a reaction in India is because, it's national folklore that the chairman of railways of that time, a British gentleman, publicly promised to eat every ounce of steel produced if Tata could produce it to British Railways specification.
True, you would not have such a reaction in your countries, because the European nations were never subjugated and their resources (plundered), as happened with the colonies. So, it's a matter of sentimentality when Indians take over Western companies, be it a non-resident Indian, LN Mittal taking over Arcelor in a smart strike, or a true-blue Indian like Ratan Tata in bleeding open combat.
It motivates and pushes all the Indians as they realise the amount of development they missed during the nearly 400 years of manufactured strife and rule by the company and the empire. And the indifferent media reaction in the West only makes us realise how much more we need to work.
For, the West is lonely, dark and deep and we have promises to keep... and miles to go before we sleep.
Put China and India together and you will realise The Sun has just begun to rise in the East."
(The letter has been edited for content and clarity.)