Group2Sameep Kunja (2011SMN6501)Anita Singh (2011SMN6504)Leena Sadhu (2011SMN6538)Piyush Bajpayee (2011SMN6539)Souptik Sarkar (2010CEC3850)

Tata-Corus Acquisition

DMS, IIT DelhiCourse : SML730Organisation Management

Former Name : Tata Iron and Steel Company

Parent : Tata Group

Type : Public BSE (500470)

Founded : 1907

Chairman : Ratan Tata

Industry : Steel

Course : SML730Organisation Management

DMS. IIT Delhi

Overview of the Acquirer

Founder : Jamshedji Tata

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Headquarter : Jamshedpur, Jharkhand, India

Name : Corus

Parent : Tata Steel, member of Tata Group

Type : Subsidiary

Founded : 1999

CEO : Kirby Adams

Industry : Steel

Course : SML730Organisation Management

DMS. IIT Delhi

Overview of the Acquired

Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V.

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Headquarter : London, England, UK

Course : SML730 Organisation Management

DMS, IIT Delhi

Reasons for Acquisition

• 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 for Bid from Tata Steel

• 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

Reasons From Corus to accept the Tata Bid

Course : SML730 Organisation Management

DMS, IIT Delhi

How the Acquisition was Implemented

• Tata acquired Corus on 2nd April 2007• The deal price was US $ 12.11 Billion• On 17th Oct 2006 Tata bid was priced at 403

pence per share (Market Price per share at that time was 390 pence)

• Tata Steel winner of the auction for Corus declares a bid of 608 pence per share

• Tata surpassed the financial bid from Brazilian Steel Maker – COMPAHNIA SIDDERUGGICA NACIONAL (CSN) – of 603 pence per share

The Tata-Corus DealStatistics

• 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 DealInvestment Vehicle

The Tata-Corus Deal

Tata Steel India

Tata Steel Holdings Asia (Singapore)

Tata Steel UK (SPV)

Corus Group Ltd. (UK)

• Appointing Advisors• Negotiating Terms• Due Diligence• Exchange of contracts• Completion

The Tata-Corus DealProcess of Acquisition

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.”

Course : SML730 Organisation Management

DMS, IIT Delhi

Was The Merger a Success or a 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 & Poor’s Rating cut it credit Rating to BB from BBB and removed them from the negative watch list

Merger – Success or Failure?

• The 150 year old Redcar plant was to be mothballed costing 1700 jobs – May 2009

• The deal led by Italian steel specialist Marcegaglia had fallen; which promised to buy around 78% of Redcar’s production

• The reason attributed to this is unprecedented fall in demand due to recession in Steel industry

Union Problems at Redcar’s Teeside Plant

Course : SML730 Organisation Management

DMS, IIT Delhi

Reasons for Success or Failure?

• Aerospace• Automotive• Construction• Consumer Products• Defense & Security• Energy & Power• Lifting & Excavation• Packaging• Rail

Success - Corus’ Diversified Presence

• The 2nd largest Company of Britain and one of the flagship companies of the Britain’s infrastructure industry

• Strong Research & Development Unit

• Several Patent’s to its credit

• Produces high end steel

• Large Customer base

Success - Corus’ R&D Unit

• 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 TATA’s

• 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

TATA’s Implementation of the Deal

• Tata Steel Stock Price

Statistics

• Tata Steel Europe Stock Price

Statistics

• Net debt fell from $10.43 billion in June, 2010 to $9.13 billion in March, 2011

• Tata Steel Group recorded profit after tax of Rs5,347 crores in Q1 FY’12, almost three times the profit of Rs1,825 crores recorded in Q1 FY’11

Statistics

Acquisition - A SUCCESS

Verdict

THANK YOU!