Date 24th July, 2011

TATA & CORUS

ADNAN ZAFAR
BEM-1047
WAQAS AHMED
BEM/973
IRFAN BADAR
BME-958
RAJESH KUMMAR BEM-1046

MERGER & ACQUISITION

Mergers- A merger is a combination of two

companies into one larger company.

Acquisition - When one company takes over

another and clearly established itself as the

new owner, the purchase is called an
acquisition.

Types of Mergers.
Horizontal merger

Two companies that are in direct competition and

share the same product lines and markets.
Vertical merger
A customer and company or a supplier and
company. Think of a cone supplier merging with
an ice cream maker.
Conglomeration
Two companies that have no common business
areas. There are two types of mergers that are
distinguished by how the merger is financed.
Each has certain implications for the companies

 Market-extension merger

Two companies that sell the same products in

different markets.
Product-extension merger
Two companies selling different but related
products in the same market.
Product extension merger

Acquisition
TATA-CORUS

Tata acquired Corus, which is four times

larger than its size and the largest steel

producer in the U.K. The deal, which creates
the world's fifth-largest steelmaker, is India's
largest ever foreign takeover and follows
Mittal Steel's $31 billion acquisition of rival
Arcelor in the same year.
Tata acquired Corus on the 2nd of April 2007
for a price of $12 billion. The price per share
was 608 pence(rs 484), which is 33.6% higher
than the first offer which was 455 pence.

VISION TATA STEEL

We aspire to be the global steel industry

benchmark for value creation and corporate

citizenship

Tata Steel Background

Tata Steel a part of the Tata group, one of the

largest diversified business in india.

Founded in 1907, by Jamshed Ji Nusserwanji
Tata.
In feb 2005 acquired singapore based Natsteel
Ltd.
In dec 2005 acquired thaialand Millennium steel .

WAQAS AHMED
BEM/973

COUNTRIES TO GLOBAL
STEEL INDUSTRY

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Global Steel ranking

11

Company

Capacity(in million tonnes)

Arcelor - Mittal

110

Nippon Steel

32

Posco

30.5

JEF Steel

30

Tata Steel - Corus

27.5

Bao steel China

23

US Steel

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Corus Steel Industry

Formed on 6th Oct 1999, through merger of 2

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companies : British Steel and Koninklijke Hoogovens.

Consist of four divisions : Strip products, Long
products, Aluminum and Distribution, Building system
Operates as an International company
Core business in Manufacturing, Development and
Allocation of Aluminum and Steel products and
services
Wide variety of products and services
Largest steel producer in UK with 10,142 million
annual revenue and work force of 50,000 employees

Objectives of Acquisition
Higher profitability

Global No. 5 company

By 2012, expected production of 40 million tonnes

giving it the position of Global number 2.

To gain access to global steel market and expand
production capacity to keep pace with growing
demand for steel
Jim Leng, Chairman of CorusThis offer from Tata
Steel reflects the substantial value created for Corus
shareholders
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Objectives of Acquisition
TATA looking for mature market in Europe for its

finished products
Corus holds a number of patients and R & D
facility.
Cost of Acquisition lower than setting up a green
field plant and marketing and distribution channel.
Corus wanted to reduce its employees cost and
TATA is well known for handling its labours
efficiently.

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IRFAN BADAR
958

15

BME-

The DEAL..
Officially announced on April 2nd 2007.
TATAs motive is to capture the market value.

Total value of this acquisition was $12 Billion (608

pence per share except 603 per share).

Corus gained profitable opportunity to exit and a

buyer for some time.

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Ups and down

Sep 20, 06 : CORUS uses the strategy to work with low cost

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producer.
Oct 06, 06 : Initial offer by TATA is considered to be too low.
Oct 17, 06: TATA kept its offer to 455 pence per share.
Oct 20, 06 : CORUS accepts the offer of 4.3 billion.
Oct 23, 06 : Brazilian Steel Group CSN counter-offer to TATAs offer.
Oct 27, 06 : CORUS criticized by JCB for acceptance of TATAs
offer.
Nov 18, 06 : The CSN approaches Corus With an offer of 475 pence
per share
Nov 27, 06 : Board of Corus decides to give more time for
shareholders to decide whether it issue forward a formal offer.
Dec 18,06 : Tata increases its original bid for Corus 500 pence per
share, then CSN made its counter bid at 515 pence per share in
cash
Jan 31, 07 : Tata had agreed to offer Corus investors 608 pence per

TATA After Acquisition

Seven member team for this DEAL.

TATA has to pay $12 billion, where 2/3rd was being

financed.
After the bidding conflict with CSN, TATA ended up

paying more to CORUS.

Still TATA earned operating profits of $840 million on

sales of 5.3 million tonnes of steel, while CORUS

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earned $860 million on sales of 18.6 million tones of

RAJESH KUMMAR
1046

19

BEM-

SWOT Analysis for TATA

Strength
Lowest cost producer in world.
Experience of TATA group in doing global activity.
Stable balance sheet (Low Debt to Equity Ratio).

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

production.

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Swot Analysis
Opportunity
Consolidation trend in Steel Industry
CSNs lost image after failure of 2002 negotiations
To get exposed to global steel market

Threat
Brazil company CSN
Russian company Severstal

No committed financers to support the possible deal

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Loss in quarter 1 of 2009 - 2010

TATA Steel posted a consolidated net loss (including

Corus) of Rs 2,209 crore ($461 million).

Incurred a profit of Rs 3,901 crore ($814 million ) in the
April-June quarter of FY09.
Sales volume of Indian operations was higher by 22
percent but sales from its European operations (Corus)
fell heavily.
Group consolidated turnover was Rs.23,292 crores as
compared to Rs. 43,496 crores.

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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
-

Ratan Tata

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