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    Tata Corus

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    sunit1
    Tata Steel acquired UK-based steel producer Corus in 2007 for $12.11 billion, making it one of the largest acquisitions by an Indian company. Tata aimed to gain a stronger presence in global and European steel markets, acquire Corus' technology and high-value products, and achieve economies of scale through synergies between the two companies. The acquisition was implemented through a public bidding process where Tata outbid a Brazilian competitor. It was financed primarily through debt and helped Tata become a top global steel producer. While initially risky due to debt levels, the acquisition ultimately proved successful by significantly growing Tata's production and profitability.

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    Tata Corus

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    sunit1
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    Tata Steel acquired UK-based steel producer Corus in 2007 for $12.11 billion, making it one of the largest acquisitions by an Indian company. Tata aimed to gain a stronger presence in global and European steel markets, acquire Corus' technology and high-value products, and achieve economies of scale through synergies between the two companies. The acquisition was implemented through a public bidding process where Tata outbid a Brazilian competitor. It was financed primarily through debt and helped Tata become a top global steel producer. While initially risky due to debt levels, the acquisition ultimately proved successful by significantly growing Tata's production and profitability.

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    Tata Steel acquired UK-based steel producer Corus in 2007 for $12.11 billion, making it one of the largest acquisitions by an Indian company. Tata aimed to gain a stronger presence in global and European steel markets, acquire Corus' technology and high-value products, and achieve economies of scale through synergies between the two companies. The acquisition was implemented through a public bidding process where Tata outbid a Brazilian competitor. It was financed primarily through debt and helped Tata become a top global steel producer. While initially risky due to debt levels, the acquisition ultimately proved successful by significantly growing Tata's production and profitability.

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    51 views29 pages

    Tata Corus

    Uploaded by

    sunit1
    Tata Steel acquired UK-based steel producer Corus in 2007 for $12.11 billion, making it one of the largest acquisitions by an Indian company. Tata aimed to gain a stronger presence in global and European steel markets, acquire Corus' technology and high-value products, and achieve economies of scale through synergies between the two companies. The acquisition was implemented through a public bidding process where Tata outbid a Brazilian competitor. It was financed primarily through debt and helped Tata become a top global steel producer. While initially risky due to debt levels, the acquisition ultimately proved successful by significantly growing Tata's production and profitability.

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    of 29

    Tata-Corus Acquisition

    VISION TATA STEEL

    We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship

    Overview of the Acquirer


    1

    Former Name : Tata Iron and Steel Company Founded : 1907 Founder : Jamshedji Nusserwanji Tata Headquarter : Jamshedpur, Jharkhand, India Chairman : Ratan Tata Type : Public BSE (500470)

    Industry : Steel Parent : Tata Group

    Overview of the Target


    1

    Name : Corus Founded : 1999 Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V. Headquarter : London, England, UK CEO : Kirby Adams Type : Subsidiary

    Industry : Steel Parent : Tata Steel, member of Tata Group

    THE DEAL

    Official Announcement: April 2nd ,2007 Price of Deal: 608 pence per ordinary share in cash Total Value of the Deal: US $ 12.11 Billion Deal Competitor: Companhia Siderurgica National (CSN) Competitors Bid: 603 pence per share Deal process commencement: September 20,2006 Deal process completion : July 2, 2007

    Synergies between the two companies


    The Positive Side (TATA Steel)
    Tata was one of the low cost steel producer Had strong retail and distribution in SE Asia Had self sufficiency in raw material Indian Auto Industry was the main consumer

    The Negative Side (CORUS Group)


    Corus was fighting to keep its production cost under control It had to look out for the Source of the Iron Ore.

    Milestone- Key Date

    September 20, 2006 : Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer October 5, 2006 : The Indian steel giant, Tata Steel wants to fulfill its ambition to Expand its business further. October 6, 2006 : The initial offer from Tata Steel is considered to be too low both by Corus and analysts. October 17, 2006 : Tata Steel has kept its offer to 455p per share.

    October 18, 2006 : Tata still doesnt react to Corus and its bid price remains the same.
    October 20, 2006 : Corus accepts terms of 4.3 billion takeover bid from Tata Steel

    October 23, 2006 : The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steels bid.

    Key Date cont.

    October 27, 2006 : Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata. November 3, 2006 : The Russian steel giant Severstal announces officially that it will not make a bid for Corus November 18, 2006 : The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475p per share December 18, 2006 : Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazil's CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel's Offer. January 31, 2007 : Britain's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash

    April 2, 2007 : Tata Steel manages to win the acquisition to CSN and has the full voting support from Corus shareholders

    Objective behind M&A deal

    Gain market share Economies of scale Enter new markets Acquire technology Utilization of surplus funds: surplus fund mean cash flow available after the payment of tax. It is the remaining money after all liabilities including tax, insurance and expenses. Managerial Effectiveness: it is base on 3 views. Traditional perspective, organizational and individual. Strategic Objective: It is base on the mission n vision statement that how they fulfill or move towards the high goal.

    COMBINED AMBITION
    Become a global player with a balanced presence in developed European and fast growing Asian markets. Acquire strong positions in construction, automotive and packaging market sectors. Significant raw material security and greenfield / brownfield developments. Lowest cost position in Europe & South East Asia. Own developmental plans.

    DOUBLE THE SIZE AND PROFITABILITY

    Current : EBITDA OF 13% ; 25 million tonnes

    By 2012 : EBITDA of 25% ; 40 million tonnes

    Pre Merger Period

    In 2006, TISCO signed a deal with Corus to acquire it (455)

    pence per share. Counter attack by Brazilian Company CSN The offer was for 475 pence per share Looking at this scenarios Corus Group asked both the Company to attain an auction More the bid wins the Share The last offer by CSN was 604 pence per share and Tata Steel Won their bid by offering 608 pence per share.

    The Tata-Corus Deal


    Investment Vehicle

    A holding company was setup by Tata in Singapore to acquire Corus. Idea was to have all foreign acquisitions under one holding company. Singapore has a favorable Tax jurisdiction and gave Tata Steel an easy avenue for raising global resources and funds.

    The Tata-Corus Deal

    Corus Group Ltd. (UK)

    Tata Steel UK (SPV)

    Tata Steel Holdings Asia (Singapore)

    Tata Steel India

    Reasons for Acquisition

    Reasons for Bid from Tata Steel

    To tap European mature market Cost of acquisition is lower than setting up green field plant and marketing and distribution channel. Tata manufactures low value long and fast steel products while Corus produced high value stripped products

    Reasons for Bid from Tata Steel

    Acquisition would help Tata to feature in top 10 players in the world. Technology benefit Economies of scale Corus held a number of patents and R&D facilities

    Reasons From Corus to accept the Tata Bid

    Saturated market of Europe To extend its global reach through Tata To get access to low cost Indian Ore reserves Decline in market share and profit Total debt of Corus was 1.6 Bn GBP Facilities were old with high cost of production

    FINANCING THE DEAL


    TATA CORUS Deal - $ 12 billion Funding was for 60:40 debt equity. Equity Contribution from Tata Steel - $ 3.88 billion. Credit Suisse leaded, joined by ABN AMRO and Deutsche Bank in the consortium. Of the $ 8.12 billion of financing, Credit Suisse provided 45% and ABN AMRO and Deutsche provided 27.5% each.

    How the Acquisition was Implemented

    The Tata-Corus Deal


    Process of Acquisition

    Appointing Advisors Negotiating Terms Due Diligence Exchange of contracts Completion

    Ratan Tata Chairman of Tata Steel on Acquisition

    This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion. Corus and Tata Steel are companies with long, proud histories. We have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread. Together we will be even better equipped to remain at the leading edge of the fast changing steel industry.

    Was The Merger a Success or a Failure?

    Merger Success or Failure?

    The following points can be attributed: TATA Steel Group rose to 5th position from 56th The production capacity increased from 4million tonnes to 28million tonnes by 2011
    Standard & Poors Rating cut it credit Rating to BB from BBB and removed them from the negative watch list

    TATAs Implementation of the Deal

    Big boost to the Indian economy, as TATA was acquiring a company 3 times its size The R&D Unit of Corus complements that of TATAs Links low cost Indian production and raw materials and growth markets to high margin markets and high technology in the West Help from financing institutions as $8 billion was raised through debt

    Statistics

    Tata Steel Stock Price

    Statistics Tata Steel Europe Stock Price

    Verdict

    Acquisition - A SUCCESS

    THANK YOU!

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