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

10

Global Steel ranking

Company Arcelor - Mittal Nippon Steel Posco Capacity(in million tonnes) 110 32 30.5

JEF Steel
Tata Steel - Corus Bao steel China US Steel

30
27.5 23 19

11

Corus Steel Industry

Formed on 6th Oct 1999, through merger of 2

12

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
13

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.

14

IRFAN BADAR 958

BME-

15

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.

16

Ups and down

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

17

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

18

earned $860 million on sales of 18.6 million tones of

RAJESH KUMMAR 1046

BEM-

19

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.

20

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

21

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.

22

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

23

24