Twenty years ago, on 20 October 2006, the board of Corus, the Anglo-Dutch steelmaker, backed a cash offer of 455 pence a share from Tata Steel of India, valuing Corus’s shares at about £4.3bn. Corus made 18.3 million tonnes of crude steel in 2006; Tata Steel made about 5 million tonnes in its year to March 2007. After a three-month contest with Brazil’s CSN, Tata paid 608 pence a share, about £6.2bn (roughly $12bn), and borrowed most of the money.
It is a textbook case of a small company buying a much bigger one with debt, and its long tail, from write-downs to the end of blast furnaces in Wales, is still running in 2026.
Two steelmakers of very different size
Corus was formed in 1999, when British Steel in effect took over the Dutch steelmaker Hoogovens. Tata Steel described it as Europe’s second-largest steel producer and the world’s ninth, with plants such as Port Talbot in Wales and IJmuiden in the Netherlands. Tata Steel was smaller but far more profitable. One case study, by ICMR, put Corus’s EBITDA margin (operating profit before depreciation, as a share of sales) at 8% in 2006-07, against 30% at Tata Steel.
Tata Steel said the combined group would be the world’s sixth-largest steelmaker, with about 28 million tonnes of capacity. AFP called it the largest overseas acquisition ever made by an Indian company. Ratan Tata, then chairman, presented it as part of a globalisation strategy rather than an opportunistic move.
From 455p to 608p: how the auction worked
Corus’s shares already traded above 455p, and DutchNews reported that analysts thought investors were betting on a higher bid. CSN arrived on 17 November with 475p, according to the ICMR case study. On 10 December Tata raised its offer to 500p; on 11 December CSN offered 515p.
The UK Takeover Panel, which supervises bids for UK companies, then set a formal auction. It began at 4.30pm London time on 30 January 2007 and allowed up to nine rounds. In the first eight rounds, a bidder that was behind had to top the leading price by at least 5p.
Tata won overnight with 608p in cash, 5p above CSN’s final 603p. That was 33.6% above its own first offer and 49.2% above Corus’s share price in early October 2006. Including debt, the companies put the price at about 9 times Corus’s EBITDA for the twelve months to September 2006. The deal ran as a scheme of arrangement, a court-approved procedure in which a shareholder vote binds everyone, and completed on 2 April 2007.
Paying with borrowed money
Tata Steel’s 2006-07 annual report puts the net cost at about $12.9bn (about $13.75bn including debt taken over). The buyer was a special-purpose company, Tata Steel UK, owned through Tata Steel Asia Holdings in Singapore. The money came in layers:
- $6.14bn of long-term debt at the Corus level, without recourse to Tata Steel. Non-recourse means the lenders could look only to Corus and the UK buying company, not to Tata Steel in India.
- $2.66bn of quasi-equity and long-term funding at the Singapore holding company, at first in bridge loans.
- $4.1bn of equity from Tata Steel, drawn from its own cash, $500m of new borrowing, two rights issues, a planned foreign equity issue and a $640m share issue to Tata Sons.
In May 2007 a £3.62bn bridge facility was refinanced with £3.17bn of non-recourse loans. Tata Sons, the group holding company, also agreed to take up any rights shares that other investors left unsold. Charitable trusts own about two-thirds of Tata Sons today (how that works). The debt was ring-fenced, and the group’s long-term owner stood behind the equity.
The long tail, from write-downs to Port Talbot
Then came the financial crisis. Tata Steel took an impairment of Rs 4,094.5 crore in 2008-09 after restructuring in Europe, and a non-cash write-down of about $1.6bn in May 2013, when Business Standard reported European steel demand down about 30% since the crisis. In 2017 the same paper counted £2bn of UK impairments in 2011-2016, and losses of about £1m a day in 2015-16.
Tata sold pieces: Teesside Cast Products in 2011 and the European long-products business to Greybull Capital in 2016. In 2017, to separate from the British Steel Pension Scheme, Tata Steel UK paid £550m and gave the scheme a 33% economic stake.
At Port Talbot, the last blast furnace closed on 30 September 2024; Reuters reported almost 3,000 jobs cut in the switch. A £1.25bn electric arc furnace, which melts scrap, is backed by £500m from the UK government. The Financial Times, cited by GMK Center, reported a £1.12bn pre-tax loss at Tata Steel UK for 2023-24 and said the parent would provide at least £1bn of equity. In September 2026 Sky News reported, according to Maritime Gateway, that the new furnace had slipped to late 2028 or early 2029 and that Tata was seeking more public money.
IJmuiden is still owned by Tata Steel, through Tata Steel Nederland. In September 2025 it signed a non-binding letter of intent with the Dutch state for up to €2bn of support for cleaner steelmaking. In late September 2026 the parties extended it to 1 March 2027, with no final deal; the union FNV blames the Indian parent for not signing.
A fair caveat
It is tempting to judge the deal with hindsight, but no one can know how Tata Steel would have fared without it, and the 2008 crisis was not in anyone’s plan in 2006. We rely on Tata Steel’s figures and press reports; Corus’s margin comes from a single case study.
Five lessons to take away
- You can buy size, but the margins come too. Tata bought tonnes and a business far less profitable than its own.
- Auctions push the price up. Tata paid a third more than its first offer to beat CSN.
- Non-recourse debt limits the lenders’ claims, not the owner’s problems. In 2024 Tata Steel agreed, the FT reported, to put at least £1bn more into the UK business.
- A patient owner can make a bold deal possible. Tata Sons promised to take up unsold shares.
- Liabilities outlive the deal. Pensions, closures and cleaner steel are still being settled two decades on (more on concentration risk).
Questions to bring to your advisors
If our family company plans a large acquisition, how much of the price is debt, and who carries it if the target struggles? What backstops would the family holding give? Which pension, environmental and closure costs come with the target? What is our walk-away price before an auction starts? These are questions to bring to your advisors, not advice.
