a caselet on bs ii tata corus-acquisiion
TRANSCRIPT
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8/7/2019 A caselet on BS II tata Corus-Acquisiion
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TATA & CORUSTATA & CORUS
(A(A CASECASE OFOFAACQUISITIONCQUISITION))
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COMPANYS PROFILECOMPANYS PROFILE
Founded in 1907,byJamsetji Nusserwanji Tata.
Tata company listed on BSE and NSE and employsabout 82700 (2007) people.
started with a production capacity of 1,00,000 toneshas transformed into a global giant .
TATA SteelTATA Steel
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Its revenue in 2005-2006 was 5.0 billion US $.
It has a main steel plant located at Jamshedpur.
The Company also has three Greenfield steel projects
in the states of Jharkhand, Orissa and Chhattisgarh.
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Corus is Europe's second largest steel producer.
Corus group was formed on 6th October 1999.
Company has four divisions: Strip product , Longproduct , Aluminum and Distribution and Building
system.
CORU S SteelCORU S Steel
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Corus main steelmaking operations primarily in the
UK and the Netherland.
Corus provides innovative solutions.
It is listed on London stock exchange.
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VISIONVISION
Weaspir
eto b
ethe
global stee
l industryWe
aspire
to be
the
global stee
l industrybenchmark forbenchmark for
Value Creation and Corporate CitizenshipValue Creation and Corporate Citizenship
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CHALLENGESCHALLENGES
1. FINANCIAL ASPECTS.
2. NON FINANCIAL ASPECTS Cultural differences
Structures and Compensation models
Foreign political Environment.
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THE DEALTHE DEAL
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ABOUT THE DEALABOUT THE DEAL
TATA Acquired CORUS on 2ndApril 2007 which is 4
times larger than its size.
The deal price was $ 12 Billion.
TATA Steel,the winner of the auction for CORUS
declares a bid of 608 Pence per share.
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In 2005 when the deal was started the
price per share was 455 pence.
TATA Surpassed the final bid from Brazilian steel
maker COMPANHIA SIDERURGICA NACIONAL
(CSN) of 603 pence per share.
The combined entity has become the worlds fifth
largest steelmaker after the deal.
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For this deal TATA has finance only 4 Billion $ from
internal company resources.
TATA Have secured funding commitments from itsadvisors.
These advisors were Deutshe bank, ABN Amro and
Standard Chartered.
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IMPORTANCE OF DEALIMPORTANCE OF DEAL
The initial motive behind the deal was not CORUS
revenue size but rather its market value.
To compete on global scale because then TATA wasjust at 56th rank in steel production.
CORUS holds a number of Patents and R & Dfacility.
FOR TATAFOR TATA
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Acquiring Corus will give Tata access to European
customers of steel.
Acquisition cost will be lower then setting up new green
field plants and marketing channel.
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Saturated market of Europe.
Better facilities and lower cost of production
Employee cost was 15 % (TATA- 9%)
Profit margin was 3.4% (TATA- 17%)
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PROCESS OF DEALPROCESS OF DEAL
Sep 20, 06 : CORUS uses the strategy to work with low cost producer.
Oct 06, 06 : Initial offer by TATA is considered to be too low.
Oct 17, 06: TATA kept its offer to 455 pence per share.
Oct 20, 06 : CORUS accepts the offer of 4.3 billion.
Oct 23, 06 : Brazilian Steel Group CSN counter-offer to TATAs offer.
Oct 27, 06 : CORUS criticized by JCB for acceptance of TATAs offer.
Nov 18, 06 : The CSN approaches Corus With an offer of 475 pence per share
Nov 27, 06 : Board of Corus decides to give more time for shareholders to decide
whether it issue forward a formal offer.
Dec h18,06 : Tata increases its original bid for Corus 500 pence per share, then CSN
made its counter bid at 515 pence per share in cash
Jan 31, 07 : Tata ad agreed to offer Corus investors 608 pence per share in cash
Apr 02, 07 : Tata steel manages to win acquisition to CSN and has the full voting
support from Corus shareholders
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Major Acquisitions
Target Buyer Value ($ bn) Year
Arcelor Mittal Steel 31 2006
NKK Corp Kawasaki Steel 14.1 2001
LMM Holdings Ispat Intl 13.3 2004
Corus TATA 12.0 2006
Krupp AG Thyssen 8.0 1997
Dofasco Arcelor 5.2 2005
Intl Steel Mittal Steel 4.8 2005
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GLOBAL STEEL RANKINGGLOBAL STEEL RANKING
COMPANYCOMPANY CAPACITY inCAPACITY in
(million tones)(million tones)
1.Arcelor-Mittal
2.Nippon steel
3.Posco
4.JEF steel
5.Tata steel- Corus
110.0
32.0
30.5
30.0
27.7
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PPOSTOSTAACQUISITIONCQUISITION
New entity will be run by one of Tatas steel
subsidiaries.
Seven members committee.
Share price of TATA
On the date of announcement 536.60
On the date of Acquisition- 464.90
Todays price- 511.35
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Tata Steel- Corus : Projected capacity
(in million tones per annum)
Corus Group (in UK and Netherlands) 19
Tata Steel- Jamshedpur 10
Tata Steel- Jharkhand 12
Tata Steel- Orissa 6
Tata Steel- Chattisgarh 5
Tata Steel- Singapore 2
Millennium Steel- Thailand 1.7
Aggregate projected capacity 55.7
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