Tata Steel-Tata Steel BSL: A favourable merger ratio

Following the successful resolution of insolvent Bhushan Steel, Tata Steel induced a portion of capital in the form of equity on taking over. Lenders, too, converted some of their debt to equity.

This led to significant dilution of public shareholding in the erstwhile Bhushan Steel (now, Tata Steel BSL). But if you still hold the shares of Tata Steel BSL, you have a reason to smile. To leverage on operational synergies and to simplify the group’s structure, Tata Steel and Tata Steel BSL have proposed to merge both the companies. The recommended merger ratio would be one share of Tata Steel for every 15 shares of Tata Steel BSL.

As per the closing stock prices on the lat trading day, 15 shares of Bhushan Steel is priced ₹519. Post-amalgamation, the total number of shares of Tata Steel will be increased by nearly two crore. Taking the current market valuation of Tata Steel, the share price of Tata Steel, post-amalgamation, would be ₹535.68. This means that a share of Tata Steel is issued at a discount of ₹16.68 or 3 per cent. Note that the merger is subject to shareholders and other regulatory approvals.

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