Corus Rise in Shares to Pay for Job Cuts, Plant Closings
Nov 14, 2003
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Anglo-Dutch steel and aluminum maker Corus (Amsterdam, The Netherlands and London, England) raised 291 million pounds (U.S. $487 million) from a share placing to pay for job cuts and plant closures in Britain, boosting its stock almost 30 percent. Deutsche Bank also changed Corus’s status to "hold" from "sell" after the company said it would release capital to finance a restructuring at its United Kingdom operations.
Corus—Europe's third-largest steel maker—has been plagued by losses due to cheaper imports and a global economic slowdown. The company said the fully underwritten placing and open offer was received well by the market, with 1.3 billion new ordinary shares snapped up by investors within a few hours of its launch.
The new Corus Group Plc shares were issued at 23.5 pence a piece, with five new ordinary shares offered for 12 existing shares. The issue is expected to raise 307 million pounds before expenses, 291 million pounds after costs.
CEO Philippe Varin said the placing would put the company’s finances on a stronger footing and help it close a competitive gap with other leading European steel makers.
Analysts and fund managers said the issue—amounting to about 40 percent of outstanding share capital—would buy Corus the time it needs to complete a sweeping restructuring of its U.K. operations, which is necessary after it was forced to slash thousands of jobs and shut plants.
"This is very good news for the group," ING analyst Alain William said. "We will be reviewing both our target price and rating on the company," said Mr. William, who had had a "sell" rating on Corus and a target price of 24 pence.
Mr. Varin reiterated the firm's future plans to focus only on carbon steel, while it explored opportunities for its aluminum operations. However, he told reporters in London that there were no negotiations currently on to sell the aluminum business.
The share placing will help Corus avoid a fire sale of its aluminum assets and realize better value, he added.
Earlier this year, Corus was forced to scrap the sale of aluminum assets to Pechiney because of Dutch opposition. Corus's Dutch supervisory, or non-executive, board and its works council said they supported the share issue.
Britain's ISTC union, a vocal critic of the company in the past, also said it supported the issue.
The group, which has suffered four years of losses and said in September it would need at least another two years to return to profit, said its U.K. restructuring would cost up to 250 million pounds but yield annual profit gains of up to 120 million pounds by the end of 2006.
The first phase of the overhaul at Corus' engineering steels business was announced in September. The second phase, launched Nov. 12, covers its strip and long products.
Together, they are expected to lead to the closure of one plant and concentration of output at three sites in the UK, which will probably result in 1,150 job cuts.
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