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Tata Corus Acqusition
Tata Corus Acqusition
Objectives of Research
Introduction. Indian Steel Market. CORUS Steel Industry. The DEAL. TATA
after
Acquisition.
Loss in the 1st Quarter
2
of 2009
business history.
Cont
Steel industry (heavy industry) is
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 7 Largest steel producer in UK with 10,142
Objectives of Acquisition
Higher profitability TATA current EBITDA is 13% production
tonnes Global No. 6 company By 2012, EBITDA expected is 25%, 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
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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Consolidation Synergy
As part of its integration process being
done at two levels, the steel makers expects to cross the $450 million target by the end of 2010.
Synergy targets to be achieved included
areas of manufacturing procurement research and development, I.T., Finance and capital projects
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positive one by 2007 08 through new initiatives, to be called ASPIRE, in all relevant areas of our business. We will continue to be the lowest cost producer of steel in the world by continuous improvement, benchmarking and up gradation. We will strengthen our partnerships with our customers and suppliers, and create mutually value creating opportunities. Unleash peoples potential and create more
The DEAL..
Officially announced on April 2nd 2007. TATAs motive is to capture the market value. Total value of this acquisition was $12 Billion
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 13 pence per share, then CSN made its counter bid at 515
being financed.
After the bidding conflict with CSN, TATA
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
deal
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(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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interpretation.
Identifies various characteristics of
organization.
Prediction is used outside the boundary of
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research.
automotive sectors.
Bidding Disturbance from CSN to TATA Steel
455 pence per share is pushed to 608 pence per
share of Corus.
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the targets management Local Market reaction Arranging funds as it was an all cash deal
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Alternates
Global Expansion
Taking the TATA trust globally Joint Ventures with other steel manufacturers Could have searched for reserves in India,
Singapore etc.
Profitability
Could have diversified its investment
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Alternatives
Expansion If TATA steel were to create,
from scratch, 19 million tonnes of steel making capacity comparable in quality to what Corus possesses, It would end up investing 70% to 85% more than it is paying now.
Besides, setting up a new factory, a 3 to 5
Contingency Plan
The Contingency plan could have been a
joint venture with mittal steels as it is allready into process of setting up a big steel unit in Orrisa, TATA could have provided them with iron ore reserves and would have expected share in its profits
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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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