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    2 Tata Steel Acquired 100% Stake in Corus Group

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    Priyanka Kaul
    Tata Steel acquired Corus Group for $12.2 billion in January 2007. There were synergies between Tata as a low-cost steel producer and Corus as a high-value manufacturer. The acquisition gave Tata access to Corus' technology and markets in Europe and America, while providing Corus with opportunities in India and Southeast Asia. The deal structure involved $3.5-3.8 billion in financing from Tata Steel and $5.6 billion in loans. While controversial, the acquisition made Tata Steel one of the largest global steel producers.

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    2 Tata Steel Acquired 100% Stake in Corus Group

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    Priyanka Kaul
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    Tata Steel acquired Corus Group for $12.2 billion in January 2007. There were synergies between Tata as a low-cost steel producer and Corus as a high-value manufacturer. The acquisition gave Tata access to Corus' technology and markets in Europe and America, while providing Corus with opportunities in India and Southeast Asia. The deal structure involved $3.5-3.8 billion in financing from Tata Steel and $5.6 billion in loans. While controversial, the acquisition made Tata Steel one of the largest global steel producers.

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    Tata Steel acquired Corus Group for $12.2 billion in January 2007. There were synergies between Tata as a low-cost steel producer and Corus as a high-value manufacturer. The acquisition gave Tata access to Corus' technology and markets in Europe and America, while providing Corus with opportunities in India and Southeast Asia. The deal structure involved $3.5-3.8 billion in financing from Tata Steel and $5.6 billion in loans. While controversial, the acquisition made Tata Steel one of the largest global steel producers.

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    169 views4 pages

    2 Tata Steel Acquired 100% Stake in Corus Group

    Uploaded by

    Priyanka Kaul
    Tata Steel acquired Corus Group for $12.2 billion in January 2007. There were synergies between Tata as a low-cost steel producer and Corus as a high-value manufacturer. The acquisition gave Tata access to Corus' technology and markets in Europe and America, while providing Corus with opportunities in India and Southeast Asia. The deal structure involved $3.5-3.8 billion in financing from Tata Steel and $5.6 billion in loans. While controversial, the acquisition made Tata Steel one of the largest global steel producers.

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    Tata Steel acquired 100% stake in Corus Group

    Background:There were a lot of apparent synergies between Tata Steel which was a low cost steel producer in fast developing region of the world and Corus which was a high value product manufacturer in the region of the world demanding value products. Some of the prominent synergies that could arise from the deal were as follows :

    Tata was one of the lowest cost steel producers in the world and had self sufficiency in raw material. Corus was fighting to keep its productions costs under control and was on the look out for sources of iron ore. Tata had a strong retail and distribution network in India and SE Asia. This would give the European manufacturer an in-road into the emerging Asian markets. Tata was a major supplier to the Indian auto industry and the demand for value added steel products was growing in this market. Hence there would be a powerful combination of high quality developed and low cost high growth markets There would be technology transfer and cross-fertilization of R&D capabilities between the two companies that specialized in different areas of the value chain There was a strong culture fit between the two organizations both of which highly emphasized on continuous improvement and ethics. Tata steel's Continuous Improvement Program Aspirewith the core values :Trusteeship,integrity,respect for individual, credibility and excellence. Corus's Continuous Improvement Program The Corus Way with the core values : code of ethics, integrity, creating value in steel, customer focus, selective growth and respect for our people.

    Cost of acquisition: $12.2 billion Year: January 30, 2007 Steps involved in the process:

    On October 20, 2006, Tata Steel announced that it had agreed to pick up a 100% stake in the Anglo-Dutch steel maker Corus at 455 pence per share in an all cash deal, cumulatively valued at GBP 4.3 billion (USD 8.04 billion).

    On November 19, 2006, the Brazilian steel company CSN launched a counter offer for Corus at 475 pence per share, valuing it at $8.4 billion. On December 11, 2006, Tata preemptively upped the offer to 500 pence, which was within hours trumped by CSN's offer of 515 pence per share, valuing the deal at $ 9.6 Billion. The Corus board promptly recommended both the revised offers to its shareholders. On December 11, 2006, CSN announced a formal offer for the Company at an offer price of 515 pence per Corus Share , valuing the deal at $ 9.6 Billion.. The CSN Acquisition would also be implemented by way of a scheme of arrangement and is subject to a pre-condition that either Corus Shareholders reject the Tata Scheme or the Tata Scheme is otherwise withdrawn by Corus or lapses. The Corus board promptly recommended both the revised offers to its shareholders. Also on December 19, 2006, UK Watchdog the Panel on Takeovers and Mergers announced that the last date for each of Tata and CSN to announce revised offers for the Company, should they wish to do so, is 30 January 2007. They also warned that it would begin an auction procedure if the two remained in competition. On January 31, 2007 Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at $11.3bn

    Valuation of the companies and the deal


    Valuation of the Company TATA Steel: $63.0 billion (2007) Corus Group:

    Final deal structure


    $3.53.8bn infusion from Tata Steel ($2bn as its equity contribution, $1.51.8bn through a bridge loan) $5.6bn through a LBO ($3.05bn through senior term loan, $2.6bn through high yield loan)

    Impact after the deal


    Tata Steels acquisition of Corus was not without controversy. There were substantial issues raised during and after the acquisition that require a more comprehensive discussion, especially in light of the turn of events witnessed in the two years following the acquisition. The current industry woes (in December 2008 global steel production declined by 23.4%) are seen by some experts as an opportunity for expansion and strengthening of the industry in India.

    Description on the target company and the acquirer company


    Tata Steel
    'Tata Steel', formerly known as TISCO (Tata Iron and Steel Company Limited), was the world's 56th largest and India's 2nd largest steel company with an annual crude steel capacity of 3.8 million tonnes. It is based in Jamshedpur, Jharkhand, India. It is part of the Tata Group of companies. Post Corus merger, Tata Steel is India's second-largest and second-most profitable company in private sector with consolidated revenues of Rs 1,32,110 crore and net profit of over Rs 12,350 crore during the year ended March 31, 2008. The company was also recognized as the world's best steel producer by World Steel Dynamics in 2005. The company is listed on BSE and NSE; and employs about 82,700 people (as of 2007)

    Corus Group
    The London-based Corus Group is one of the world's largest producers of steel and aluminium. Corus was formed in 1999 following the merger of Dutch group Koninklijke Hoogovens N.V. with the UK's British Steel Plc on October 6, 1999. It employs 47,300 people worldwide and 24,000 people in the United Kingdom. It is listed on the London Stock Exchange, Euronext Amsterdam and the New York Stock Exchange. Corus has four divisions: strip products division, long products division, distribution and building systems division, and aluminium division. Corus has an annual turnover of $18 billion.

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    Conclusion

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