Tata Corus Aquisition

COMPANY’S PROFILE TATA STEEL Founded

in 1907,by Jamsetji Nusserwanji Tata.

Tata

company listed on BSE and NSE and employs about 82700 (2007) people.

started

with a production capacity of 1,00,000 tones has transformed into a global giant .

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.

Global Steel Market : Overview IISI

forecasts the global steel demand would be 1.32 billion tones by 2010.

Much

of these demand generated from India and China

China

highest Steel producing country

Global Steel ranking Company Arcelor - Mittal Nippon Steel Posco JEF Steel Tata Steel - Corus

Capacity(in million tonnes) 110 32 30.5 30 27.5

Bao steel China

23

US Steel

19

CORUS STEEL Corus

is Europe's second largest steel producer. Corus group was formed on 6th October 1999. Company has four divisions: Strip product , Long product , Aluminum and Distribution and Building system.

Corus

main steelmaking operations primarily in the UK and the Netherland.

Corus

provides innovative solutions.

It

is listed on London stock exchange.

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

SWOT ANALYSIS Strengths :

Opportunities:

Low Debt to equity ratio. Exposure to global steel Lowest cost producer in market. world. Consolidation trend in Steel TATA group has successfully industry. acquired some companies in the past Weakness

Threats

Corus was triple the size of TATA steel in terms of production

CSN Brazilian bidder. Severstal Russian bidder. No committed financers to support the deal .

PRE-MERGER SCENARIO

CORUS Decides to Sell..(Reasons) •Total debt of Corus was 1.6 billion GBP. •Corus needs supply of raw material at lower cost. •Though Corus has revenues of $ 18.06 billion, its profit was just $ 626 million (Tata’s revenue was $4.84 billion and profit $ 824 million) •Corus facilities were relatively old with high cost of production.

TATA decides to Bid- (Reasons) •Manufacture products in markets of Europe. •Tata manufactured low value long and flat steel products. •Diversified Product Mix. •Cost of Acquisition lower. •Efficient handling of labour. •Already established business in India. •From 55th in world to 5th in production of steel

CHALLENGES FOR TATA’s •Working in matured market. •Maintaining low cost. •High Steel prices threat. •Rivals.

THE DEAL

ABOUT THE DEAL TATA Acquired CORUS on 2nd April 2007 which is

4 times larger than its size. TATA Steel ,the winner of the auction for CORUS

declares a bid of 608 Pence per share. The deal price was $ 12 Billion.

In 2005 when the deal was started the price per

share was 455 pence. TATA emerged as the winner in the final bid from

Brazilian steel maker ‘COMPANHIA SIDERURGICA NACIONAL’ (CSN) of 603 pence per share. The combined entity has become the world’s fifth

largest steelmaker.

TATA CORUS FUNDING PATTERN For this deal TATA has finance only 4 Billion $

from internal company resources. TATA Have secured funding commitments from its

advisors. These advisors were Deutshe bank,ABN Amro and

Standard Chartered.

IMPORTANCE OF DEAL FOR TATA The initial motive behind the deal was not CORUS

revenue size but rather its market value.

To compete on global scale because then TATA was

just at 56th rank in steel production.

To get access to CORUS technology as well as its

production site.

FOR CORUS TATA was the lowest cost steel producers. Due to tough competition with Arcelor-Mittal. High quality developed and low cost high growth

market. Transfer of technology.

SYNERGIES BETWEEN TWO CO. Tata was one of the lowest cost steel producer & Corus trying to keep production cost under the control  Tata had strong retail network in India and SE.  It will give the corus road into the emerging Asian market  Strong culture fit and similar work practice emphasizes on continuous improvement 

PROCESS OF DEAL  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 doesn’t 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 Steel’s bid.  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 

 November

27, 2006 : The board of Corus decides that it is in the best interest of its will shareholders to give more time to CSN to satisfy the preconditions and decide whether it issue forward a formal offer  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.  JAN 31,2007:Britain’s takeover panel announces in an emailed statement that after an auction Tata steel had agreed to offer Corus investors 608p.in cash.  APRIL 2,2007: TATA ACQUIRED CORUS.

SWOT ANALYSIS

STRENGTHS Big impact globally  Facing Competition  Producing good quality at low price. 

WEAKNESS EBITDA Ratio  Requires high level of integration  Uncertainties in market condition 

OPPORTUNITIES Pricing power  Strong research & technology development  Market Capitalization 

THREATS Capacity addition by other countries  Business performance of Corus  Size of the company 

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”