On 20 October 2006 the board of directors of Anglo-Dutch steelmaker Corus accepted a $7.

6
billion takeover bid from Tata Steel, the Indian steel company. The following months saw a lot
of negotiations from both sides of the deal. Tata Steel's bid to acquire Corus Group was
challenged by CSN, the Brazilian steel maker. Finally , on January 30, 2007, Tata Steel
purchased a 100% stake in the Corus Group at 608 pence per share in an all cash deal,
cumulatively valued at USD 12.04 Billion. The deal is the largest Indian takeover of a foreign
company and made Tata Steel the world's fifth-largest steel group.

Contents
[hide]

 1 The involved companies

 2 Synergies between the two companies
 3 Counter bid by CSN
 4 Proposed funding of the deal
 5 The deal
 6 Timelines
o 6.1 Final deal structure
o 6.2 New Board formulation
o 6.3 Strategic and Integration Committee
 7 See also
 8 References
 9 External links

[edit] The involved companies

'Tata Steel''Italic text'', 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. [1] [2] 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. [3][4]. 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 was formed from the merger of Koninklijke Hoogovens N.V. with British Steel Plc on 6
October 1999. It has major integrated steel plants at Port Talbot, South Wales; Scunthorpe, North
Lincolnshire; Teesside, Cleveland (all in the United Kingdom) and IJmuiden in the Netherlands.
It also has rolling mills situated at Shotton, North Wales (which manufactures Colorcoat
products), Trostre in Llanelli, Llanwern in Newport, South Wales, Rotherham and Stocksbridge,
South Yorkshire, England, Motherwell, North Lanarkshire, Scotland, Hayange, France, and
Bergen, Norway. In addition it has tube mills located at Corby, Stockton and Hartlepool in
England and Oosterhout, Arnhem, Zwijndrecht and Maastricht in the Netherlands. Group
turnover for the year to 31 December 2005 was £10.142 billion. Profits were £580 million before
tax and £451 million after tax.Bold text

[edit] Synergies between the two companies

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 a 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 ‘Aspire’with 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.

[edit] Counter bid by CSN

In November 2006,Brazilian steel marker Companhia Siderúrgica Nacional (CSN)challenged
Tata Steel's proposal for acquisition. They countered Tata Steel's offer of 455 pence per share by
offering 475 pence per share of Corus.

[edit] Proposed funding of the deal

Tata surprised the credit default swap segment of the derivative markets by deciding to raise
$6.17bn of debt for the deal through a new subsidiary of Corus called 'Tata Steel UK', rather than
by raising the debt itself. Tata's security credit rating is investment grade, whereas the new
subsidiary may not be. The higher risk associated with raising debt through a subsidiary with a
lower credit rating prompted Fitch Ratings to downgrade its rating of the credit swap risks in the
takeover to 'negative'. Fitch also stated that Corus' responsibility for the debt may lead to Corus'
own unsecured debt rating being downgraded. This does not affect the rating of bonds issued by
Corus which are secured debt.

[edit] The deal

This section requires expansion.

On January 31, 2007, following the lack of agreement on an offer, an auction process was
triggered. Following the conclusion of the auction process (at an unprecedented length of nine
rounds) conducted by the Panel in accordance with Rule 32.5 of the Code (the "Auction"), Tata
Steel announced the proposed acquisition of Corus Group at 608p per share, that being 5p more
than CSN's top offer of 603p. The final valuation of Corus was thus put at $12.04 Billion

[edit] Timelines
 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

[edit] Final deal structure

  $3.5–3.8bn infusion from Tata Steel ($2bn as its equity contribution, $1.5–1.8bn through
a bridge loan)
 $5.6bn through a LBO ($3.05bn through senior term loan, $2.6bn through high yield
loan)

[edit] New Board formulation

A new board was formulated with representation from both the companies to provide a common
platform for strategy and integration.

 Mr. R.N. Tata will be the Chairman of Tata Steel and Corus
 Mr. Jim Leng will be the deputy chairman of Tata Steel and Corus
 Mr. B Muthuraman, Mr. Ishaat Hussain and Mr. Arun Gandhi to join the Corus board

Strategic and Integration Committee

A 'Strategic and Integration Committee' was formulated to develop and execute the integration
and further growth plans. Appropriate cross functional teams were formed under this committee
to look into specific issues.

[References
1. ^ Company Profile
2. ^ Tata Steel plans pooling of raw materials- Steel-Ind'l Goods / Svs-News By Industry-
News-The Economic Times
3. ^ Financial Results for the Year ended on 31st March, 2008
4. ^ Corus buy hauls Tata Steel next to Reliance