TATA & CORUS

Date – 24th July, 2011

1

ADNAN ZAFAR BEM-1047WAQAS AHMED BEM/973IRFAN BADAR BME-958RAJESH KUMMAR BEM-1046

2

MERGER & ACQUISITION

3

Mergers- A merger is a combination of two companies into one larger company.

Acquisition - When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.

Types of Mergers.

4

Horizontal mergerTwo companies that are in direct competition and share the same product lines and markets.

Vertical mergerA customer and company or a supplier and company. Think of a cone supplier merging with an ice cream maker.

ConglomerationTwo companies that have no common business areas. There are two types of mergers that are distinguished by how the merger is financed. Each has certain implications for the companies involved and for investors:

Market-extension merger Two companies that sell the same products in different markets.

Product-extension mergerTwo companies selling different but related products in the same market.

Product extension merger

5

6

TATA-CORUSTata acquired Corus, which is four times larger

than its size and the largest steel producer in the U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the same year.

Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence(rs 484), which is 33.6% higher than the first offer which was 455 pence.

Acquisition

VISION TATA STEELWe aspire to be the global steel industry

benchmark for value creation and corporate citizenship

7

Tata Steel BackgroundTata Steel a part of the Tata group, one of

the largest diversified business in india.Founded in 1907, by Jamshed Ji

Nusserwanji Tata.In feb 2005 acquired singapore based

Natsteel Ltd.In dec 2005 acquired thaialand Millennium

steel .

8

WAQAS AHMEDBEM/973

9

CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY

10

Global Steel ranking

Company Capacity(in million tonnes)

Arcelor - Mittal 110

Nippon Steel 32

Posco 30.5

JEF Steel 30

Tata Steel - Corus 27.5

Bao steel China 23

US Steel 19

11

Corus Steel Industry Formed on 6th Oct 1999, through merger of 2

companies : British Steel and Koninklijke Hoogovens.Consist of four divisions : Strip products, Long

products, Aluminum and Distribution, Building systemOperates as an International companyCore business in Manufacturing, Development and

Allocation of Aluminum and Steel products and services

Wide variety of products and servicesLargest steel producer in UK with £10,142 million

annual revenue and work force of 50,000 employees

12

Objectives of AcquisitionHigher profitabilityGlobal No. 5 companyBy 2012, expected production of 40 million

tonnes giving it the position of Global number 2.

To gain access to global steel market and expand production capacity to keep pace with growing demand for steel

Jim Leng, Chairman of Corus“This offer from Tata Steel reflects the substantial value created for Corus shareholders

13

Objectives of AcquisitionTATA looking for mature market in Europe

for its finished productsCorus holds a number of patients and R &

D facility.Cost of Acquisition lower than setting up a

green field plant and marketing and distribution channel.

Corus wanted to reduce its employees cost and TATA is well known for handling its labours efficiently.

14

IRFAN BADAR BME-958

15

The DEAL..

Officially announced on April 2nd 2007.

TATA’s motive is to capture the market value.

Total value of this acquisition was $12 Billion

(608 pence per share except 603 per share).

Corus gained profitable opportunity to exit

and a buyer for some time.

16

Ups and down 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 TATA’s offer. Oct 27, 06 : CORUS criticized by JCB for acceptance of TATA’s

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 18,06 : 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 had 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

17

TATA After AcquisitionSeven member team for this DEAL.

TATA has to pay $12 billion, where 2/3rd was

being financed.

After the bidding conflict with CSN, TATA ended

up paying more to CORUS.

Still TATA earned operating profits of $840 million

on sales of 5.3 million tonnes of steel, while

CORUS earned $860 million on sales of 18.6

million tones of steel.18

RAJESH KUMMAR BEM-1046

19

SWOT Analysis for TATAStrength

Lowest cost producer in world.Experience of TATA group in doing global activity.Stable balance sheet (Low Debt to Equity Ratio).

Weakness Corus was triple the size of TATA steel in terms

of production.

20

Swot AnalysisOpportunity

Consolidation trend in Steel IndustryCSN’s lost image after failure of 2002

negotiationsTo get exposed to global steel market

ThreatBrazil company CSN Russian company SeverstalNo committed financers to support the possible

deal

21

Loss in quarter 1 of 2009 - 2010 TATA Steel posted a consolidated net loss

(including Corus) of Rs 2,209 crore ($461 million).

Incurred a profit of Rs 3,901 crore ($814 million ) in the April-June quarter of FY’09.

Sales volume of Indian operations was higher by 22 percent but sales from its European operations (Corus) fell heavily.

Group consolidated turnover was Rs.23,292 crores as compared to Rs. 43,496 crores.

22

Conclusion

“ I believe this will be the first step in showing that Indian industry can step outside the shores of India in an international market place and acquit itself as a global player”

- Ratan Tata

23

24