Tata Steel’s board has approved the scheme of amalgamation between seven of its group companies and itself, as per the company’s exchange filing. These are Tata Steel Long Products, The Tinplate Company of India, Tata Metaliks, TRF Limited, the Indian Steel & Wire Products, Tata Steel Mining and S&T Mining Company.
The scheme of amalgamation was reviewed and recommended to the board by the committee of independent directors and the audit committee. The resources of the merged entity have been pooled to unlock the opportunity for creating shareholders’ value, said Tata Steel’s press release. The share exchange ratio has been decided individually for the seven companies, as per the filing.
The proposed amalgamation is also part of Tata Steel’s continuing journey to simplify the group holding structure. Since 2019 Tata Steel has reduced 116 associated entities (72 subsidiaries have ceased to exist, 20 Associates and JVs have been eliminated and 24 companies are currently under liquidation), said the company in its press release.
Each scheme of amalgamation will now move into a defined regulatory approval process, which includes approval by stock exchanges and the NCLT.
Rationale Behind The Merger
The amalgamation is expected to result in focused growth, and operational efficiencies, and create synergies amongst the business. In line with group level 5S strategy – simplification, synergy, scale, sustainability, and speed – proposed amalgamation will simplify group holding structure by eliminating multiple companies within the group. It is expected to lead to better utilization of common facilities, sharing of best practices, elimination of duplication and multiplicity of compliance requirement and rationalization of administrative expenses among other things.
The resulting corporate holding structure is expected to bring enhanced agility to business ecosystem of the merged entity.
Swap Ratios For The Proposed Amalgamation
Based on the reports of the independent valuers, the Board has approved swap ratios for the proposed amalgamations for the following five companies
- For every 10 shares of Tata Steel Long Products, 67 shares of Tata Steel
- For every 10 shares of The Tinplate Company of India, 33 shares of Tata Steel
- For every 10 shares of Tata Metaliks, 79 shares of Tata Steel- For every 10 shares of TRF, 17 shares of Tata Steel