Merger & Acquisition

1. Tata-Corus Acquisition
Group2
Sameep Kunja (2011SMN6501)
Anita Singh (2011SMN6504)
Leena Sadhu (2011SMN6538)
Piyush Bajpayee (2011SMN6539)
Souptik Sarkar (2010CEC3850)
Course : SML730
DMS, IIT Delhi
Organisation Management

2. Overview of the Acquirer
1 Former Name : Tata Iron and Steel Company
2 Founded : 1907
3 Founder : Jamshedji Tata
4 Headquarter : Jamshedpur, Jharkhand, India
5 Chairman : Ratan Tata
6 Type : Public BSE (500470)
7 Industry : Steel
8 Parent : Tata Group
Course : SML730 DMS. IIT Delhi
Organisation Management

3. Overview of the Acquired
1 Name : Corus
2 Founded : 1999
3 Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V.
4 Headquarter : London, England, UK
5 CEO : Kirby Adams
6 Type : Subsidiary
7 Industry : Steel
8 Parent : Tata Steel, member of Tata Group
Course : SML730 DMS. IIT Delhi
Organisation Management

4. Reasons for Acquisition
Course : SML730 DMS, IIT Delhi
Organisation Management

5. 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

6. 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

7. 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

8. How the Acquisition was Implemented
Course : SML730 DMS, IIT Delhi
Organisation Management

9. The Tata-Corus Deal
Statistics
• 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

10. 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

11. The Tata-Corus Deal
Corus Group Ltd. (UK)
Tata Steel UK (SPV)
Tata Steel Holdings Asia
(Singapore)
Tata Steel India

12. The Tata-Corus Deal
Process of Acquisition
• Appointing Advisors
• Negotiating Terms
• Due Diligence
• Exchange of contracts
• Completion

13. 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.”

14. Was The Merger a Success or a Failure?
Course : SML730 DMS, IIT Delhi
Organisation Management

15. 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 & Poor’s Rating cut it credit Rating to
BB from BBB and removed them from the
negative watch list

16. Union Problems at Redcar’s Teeside Plant
• 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

17. Reasons for Success or Failure?
Course : SML730 DMS, IIT Delhi
Organisation Management

18. Success - Corus’ Diversified Presence
• Aerospace • The 2nd largest
• Automotive Company of Britain
• Construction and one of the
• Consumer Products flagship companies
of the Britain’s
• Defense & Security
infrastructure
• Energy & Power industry
• Lifting & Excavation
• Packaging
• Rail

19. Success - Corus’ R&D Unit
• Strong Research & Development Unit
• Several Patent’s to its credit
• Produces high end steel
• Large Customer base

20. TATA’s 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
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

21. Statistics
• Tata Steel Stock Price

22. Statistics
• Tata Steel Europe Stock Price

23. 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

24. Verdict
Acquisition - A SUCCESS

25. THANK YOU!