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An acquisition, also known as a takeover or a buyout or a "merger", is the buying of one company (the target) by another. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover .Another type of acquisition is reverse merger a deal that enables a private company to get publicly listed in a short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly listed shell company, usually one with no business and limited assets. Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome .The buyer buys the shares, and therefore control, of the target company being purchased. Ownership control of the company in turn conveys effective control over the assets of the company, but since the company is acquired intact as a going concern,this form of transaction carries with it all of the liabilities accrued by that business over its past and all of the risks that company faces in its commercial environment .The buyer buys the assets of the target company. The cash the target receives from the sell-off is paid back to its shareholders by dividend or through liquidation. This type of transaction leaves the target company as an empty shell, if the buyer buys out the entire assets. A buyer often structures the transaction as

an asset purchase to "cherry- pick" the assets that it wants and leave out the assets and liabilities that it does not. This can be particularly important where foreseeable liabilities may include future, quantified damage awards such as those that could arise from litigation over defective products, employee benefits or terminations, or environmental damage. A disadvantage of this structures the tax that many jurisdictions, particularly outside the United States, impose on transfers of the individual assets, whereas stock transactions can frequently be structured as like-kind exchanges or other arrangements that are tax-free or tax-neutral, both to the buyer and to the sellers distribution. STEEL INDUSTRY Contribution in the development of Indias economic growth: The Indian steel industry is more than 100 years old now. The first steel ingot was rolled on 16th February 1912 - a momentous day in the history of industrial India. Steel is crucial to the development of any modern economy and is considered to be the backbone of the human civilization. The level of per capita consumption of steel is treated as one of the important indicators of socio-economic development and living standard of the people in any country. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flow and income generation. All major industrial economies are characterized by the existence of a strong steel industry and the growth of many of these economies has been largely shaped by the strength of their steel industries in their initial stages of development. India is the seventh largest steel producer in the world, employing over half a million people directly with a cumulative capital investment of around Rs. one lakh crore. It is a core sector essential for economic and social development of the country and crucial for its defense. The Indian iron and steel industry contributes about Rs.8,000 crore to the national exchequer in

the form of excise and custom duties, apart from earning foreign exchange of approximately Rs. 3,000 crore through exports. Consumption of finished steel grew by 5.9 % and increased to 24.9 million tones. steel consumption is likely to increase in the at a rapid pace in future due to large investments planned in infrastructure development, increase urbanization and growth in key steel sectors i.e. automobile, construction and capital goods. Since, then the Indian steel industry has emerged as one of the core sectors in the Indian economy with a very significant impact on economic growth. India with its abundant availability of high grade iron ore, the requisite technical base and cheap skilled labor is thus well placed for the development of steel industry and to provide a strong manufacturing base for the metallurgical industries. The deregulated Indian steel industry is performing at its peak level in almost all spheres. The total production of finished steel from April 2004 to March 2005 has been estimated to be about 383.25 lakh tones as against the production of 369.57 lakh tones during the same period last year showing an increase of 3.7 %. The most spectacular achievement has, however, been recorded in export performance. Steel has so far proved to be the single key factor responsible for industrial production and thereby, for economic growth. And it is growing from strength to strength with newer developments--both within steel making practice as well as engineering developments, which ask for more usage of steel. So much so, that economic development has become almost synonymous with steel consumption

INTRODUCTION OF TATA STEEL: Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO)) is an Indian multinational steel-making company headquartered in Mumbai, Maharashtra, India, and a subsidiary of the Tata Group. It was the 12th largest steel producing company in the world in 2012, with an annual crude capacity of 23.8 million tones, and the largest privatesector steel company in India measured by domestic production. Backed by 100 glorious years of experience in steel making, Tata Steel is among the top ten steel producers in the world with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia and is now the world`s second most geographically diversified steel producer and a

Fortune 500 Company. Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian markets, with manufacturing units in 26 countries .It was the vision of the founder; Jamsetji Nusserwanji Tata., that on 27th February, 1908, the first stake was driven into the soil of Sakchi. . Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by 2010. Tata Steel has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint venture company for coal mining in India. Also, Tata Steel has bought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore mining. Exploration of opportunities in titanium dioxide business in Tamil Nadu, Ferro-chrome plant in South Africa and setting up of a deep-sea port in coastal Orissa are integral to the Growth and Globalization objective of Tata Steel. Tata Steels vision is to be the global steel industry benchmark for Value Creation and Corporate Citizenship. Tata Steel India is the first integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management. Tata Steel has manufacturing operations in 26 countries, including Australia, China, India, the Netherlands, Singapore, Thailand and the United Kingdom, and employs around 80,500 people. Its largest plant is located in Jamshedpur, Jharkhand. In 2007 Tata Steel acquired the UK-based steel maker Corus which was the largest international acquisition by an Indian company till that date. It was ranked 471st in the 2013 Fortune Global 500 ranking of the world's biggest corporations. It was the seventh most valuable Indian brand of 2013 as per Brand Finance. On February 12, 2012 Tata Steel completed 100 years of steel making in India.

PEST ANALYSIS OF TATA STEEL INDUSTRY: Political: In the 1920s and 1930s, when it was still called Tata Iron and Steel Company, TISCO's largely tribal workers fought pitched battles with the European or Parsi management. Work conditions and the right to organize were important rallying issues, and over the years, the company developed a reputation for union-busting, often by violent meansThe value of Dorabjis Expansion Programmed came to be appreciated only during the phase when world was reeling under the pressure of the Great Depression. The Tatas survived the depression and supplied nearly three-fourths of the countrys steel requirements. By the Second World War, Tatas production capacities had expanded enough to make their prices lower than those of steel produced in England raising them to an authoritarian position. By the 1980s, the government was clearly in control of what had come to be called the commanding heights of economy. More than 45% of output in organized industry came from the public sector as well as bank and other long-lending institution. In 1981-82, eight of the largest firms in India were in the public sector, as were 24 out of the top 30 in terms of total capital employee. In this sense it could be said that Nehrus goes when he had begun the planning process had been achieved. But this success has to be seen in the context of the fact that industrial growth rates had lagged at about 4%/annum between 1964-65 and 1975-76.This rate was in sharp contrast to what was happening in the Asian economies and in Southeast Asia. These countries had achieved consistent high growth by opening up their markets and by abandoning policies of import substitution. Indira Gandhi in her second stint as prime minister was not willing two inaugurate a new industrial policy that departed from the socialist pattern put in place by her father. Yet she was far too astute not to recognize the signs of crises that were waiting in the wings. She

made the gesture that her government supports the expansion and modernization of the private sector. The basic elements of the new policy began to emerge against the background of the India Special Drawing Rights billion-dollar loan agreement with the International Monetary Fund to cope with the balance of payment deficits. Rajiv Gandhi- Both internal & external finance shortages were worsening. Trade deficit increased from 10 billion in 1983-84 to Rs. 34 billion in 1985-86 so it became difficult to repay loan. Economic: TATA Steel, formerly Tata Iron and Steel Company Ltd (Tisco), the company around which the entire township of Jamshedpur was built, was registered in Bombay (now Mumbai) on August 26, 1907. It had an initial capacity of 160,000 tons of pig iron, 100,000 tons of ingot steel, 70,000 tons of rails, beams and shapes and 20,000 tons of bars, hoops and rods. It also had a powerhouse, auxiliary facilities and a laboratory. It was in 1955 that Tata Steel began its two million-ton expansion programmed the largest project in the private sector at that time. The project was completed in December 1958. Beginning in the 1980s, the company undertook in various phases an ambitious modernization programmed. The first phase, between 1981 and 1985, involved a total project cost of Rs.223 crore. This phase, among other things, saw the installation of two 130 ton LD converters, two 250 ton a day oxygen plants, a bar forging machine, two vertical twin-shaft lime kilns and a tar-dolo brick plant. Significantly, a six-strand billet caster and a 130-tone vacuum arc refining unit were installed, that too in the integrated steel plant. The second phase (1985-1992), involving a project cost of Rs.780 crore, saw for the first time in India coal injection in blast furnaces and coke oven battery with 54 ovens using stampcharging technology. Apart from this, a 0.3 mtpa (million ton per annum) wire rod mill, a 2.5

mt pa sinter plant, a bedding and blending plant and a waste recycling plant of 1 mtpa were installed. The cost of the third phase (1992-1996) of the project was a whopping Rs.3, 600 crore, and that of the fourth phase (1996-2000) Rs.1, 300 crore. The company recently commissioned its 1.2 mt (million tone) capacity Cold Rolling Mill Complex at a project cost of Rs.1,600 crore. This four-phase modernization programmed has enabled Tata Steel to be equipped with the most modern steel-making facilities in the world. As of today, the Tata Steel facility has a hot metal capacity of 3.8 mtpa and a crude steel capacity of 3.5 mtpa, corresponding to a salable steel capacity of 3.4 mtpa. Tata Steel has been in the forefront of India's industrialization and an engine of growth. It is part of Tata Group, a prestigious, family-owned Indian multinational with 2005 revenues of $17.8 billion, the equivalent of about 2.8 % of India's GDP. Tata Steel's acquisition of Corus was a marriage made in heaven.


Social responsiveness became integral to organizational objectives of Tata Steel, even before the company was established in 1907. In 1970, however, Tata Steel formally incorporated its commitment to the stakeholder concerns, including those of the nation, and environment, in its Articles of Association. The Company shall have among its objectives the promotion and growth of the national economy through increased productivity, effective utilization of materials and manpower resources and continued application of modern scientific and managerial techniques in keeping with the national aspirations, and the Company shall be mindful of its social and moral responsibilities to the consumers, employees, shareholders, society and the local community.

For Jamsetji Tata, the progress of enterprise, welfare of people and the health of the enterprise were inextricably linked. Wealth and the generation of wealth have never "been ends in themselves, but a means to an end, for the increased prosperity of India. Tata Steels efforts at environment management are well recognized. Its Steel Works in Jamshedpur, all its mines, collieries and manufacturing divisions in its out locations are certified to ISO-14001. Jamshedpur is the only town in the country which has an ISO-14001 certified service provider. Significant achievements by the Company include an improvement in environment and resource conservation, including a reduction in green house erosion, raw materials and water consumption. The Company has increased waste reuse and recycling.

The heritage of returning to society what they earn evokes trust among consumers, employees, shareholders and the community. This heritage will be continuously enriched by formalizing the high standards of behavior expected from employees and companies.

The TATA name is a unique asset representing Leadership with Trust. Leveraging this asset to enhance group synergy and become globally competitive is the route to sustained growth and long term success. Values Trusteeship Integrity Respect for Individual Credibility Excellence.

Technology: Tata Steel has been fortunate to have leaders and a rich reservoir of committed people who could see clearly through the future and transformed the plant into a modern technological giant with the power of their meticulous envisioning, strategy and planning, through several modernization programmes having spent more than Rs. 70000 millions on environmentfriendly technologies since 1980. Installation of a modern Cold Rolling Mill Complex, built at global speed and cost, is not only the epitome of Tata Steels modernization programmed, 10

but also remains a global benchmark in project management of its kind. It is also worthwhile to mention that the Company lost dearly for their decision on the installation of EOF (Energy Optimizing Furnace) at Jamshedpur Works, and CRM (Cold Rolling Mill) at Gopalpur in Orrisa. The Tatas made a great contribution in manpower development field too. From the very beginning the Tatas invested substantial time, money and resources in training schemes. In 1921, the Jamshedpur Technical Institute was set up with a purpose to replace foreign technical experts with their Indian counterparts. Furnished with super-sophisticated labs, advanced training aids and other infrastructural facilities, the Technical Training Institutes in Jamshedpur is today one of the best in the country. Recently, a new Management Development Centre has been built at Dimna to impart advanced management training to middle and senior level managers in the Company. Various Policies of Tata Steel: Quality Policy Safety Occupational Health and Environmental Policy Human Resource Policy Social Accountability Policy Corporate Social Responsibility Policy Drug & Alcohol Policy HIV+ & AIDS Control Policy Energy Policy Towards organization: Tata was the 1st company to amend its articles of association including the clause of social welfare.


Towards shareholders: Equal participation, straight forward business policy. Towards employees: Pioneer of P.F. scheme, free medical and workmens corporation fund. Towards Society: India should not be an economic super power, but a happy country. Towards government: Suggestions of economic reforms and high tax payer company. Towards consumers: Consumer is the king of market. Quality products & services timely solutions of problems.

Sales and Distribution:

Tata Steel Limited Sales and Distribution Indian Sales Tata Steel Limited currently sells approximately 91% of its Indian operations production in the Indian market. In India, Tata Steel Limited sells the majority of its steel products to the construction and infrastructure industries, the automotive industry and the 12

general engineering industry. Tata Steel Limiteds principal products sold to the Indian construction and infrastructure industry are long products. Tata Steel Limited targets large construction companies involved in infrastructure projects as customers. Tata Steel Limiteds principal products for the Indian automotive industry are hot rolled sheets, cold rolled sheets and galvanized products. Tata Steel Limiteds Indian operations supplied 664,000 tonnes of products to the Indian automotive industry in the year ended March 31, 2006 and 856,881 tonnes in the year ended March 31, 2007. Tata Steel Limited supplies such automotive-grade steel products to a significant proportion of Indian automotive industry participants, including Tata Motors, Mahindra & Mahindra, Toyota KirloskarMotor Limited, Honda Siel Car India and Honda Motorcycle & Scooter India Limited. Tata Steel Limiteds Principal products for the Indian general engineering industry are cold rolled sheets and galvanized sheets. Tata Steel Limited also a supplier of steel to the appliance sector, including to customers such as Whirlpool, LG and Voltas.


Introduction of corus: The London-based Corus Group is one of the world's largest producers of steel and aluminum. 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. Corus is leading European manufacturer providing steel and aluminum products and services worldwide. The company is comprised of four Divisions; Strip Products, Long Products, Distribution & Building Systems and Aluminium2, and has a global network of sales offices and service centers. It focuses on semi-finished and finished carbon steel products and is not involved in iron ore extraction. Corus is Europes second largest steel producer with revenues in 2005 of 9.2 billion (US$18 billion and crude steel production of 18.2 million tonnes, primarily in the UK and the Netherlands. Corus provides innovative solutions to the construction, automotive, packaging, mechanical engineering and other markets worldwide. Tata acquired corus, which is 4 times larger than its size and the largest steel producer in the U.K. The deal, which creates the worlds fifth largest steelmaker, is


Indias largest ever foreign takeover and follow Mittal steels $31 billion acquisition of rival arcelor in same year. Tata acquires corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence, which is 33.6% higher the first offer which was 455 pence. For the fiscal year ended March 2006, the company generated revenues of $3,693.6million (IR17, 144.22 Crore), an increase of 0.1% over the previous fiscal year. The company saw a net income of $755.4 million (IR3, 506.38 Crore), an increase of 8%over fiscal 2005 months.

History of Koninklijke Hoogovens

September 20th 1918: Koninklijke Nederlandsche Hoogovens was founded in The Hague to enable Dutch industry to become less dependent on imports. The geographical location of the Netherlands was ideal for the establishment of an iron and steel company, with its excellent access to the sea for the supply of raw materials and the export of finished products. The business was established at Ijmuiden, a town on the North Sea coast with good access inland via the North Sea Canal. 1920 1941: The initial capital was raised by companies, private investors, the Dutch State and the city of Amsterdam. Construction began in 1920, andin1924 the first blast furnace was commissioned and iron production began. By the mid 1930's, Hoogovens had become the largest exporter of pig iron in the World. In 1936, they began producing cast-iron pipes .Steel production began in 1939, using open-hearth furnaces. In 1941, Hoogovens acquired Van Leer's Walsbedrijven, a rolling mill that was renamed Walserij Oost (East Rolling Mill).


The 1960's In the mid-sixties Hoogovens decided to diversify, particularly into aluminium and mining. In 1966, the Aldel primary aluminium smelter was commissioned, after the acquisition a year earlier of Vaassen Aluminium. The 1970's In 1970, Hoogovens took a holding in Sidal, aluminium rolling and extrusion company. On the7 July 1972 Hoogovens and Hoesch of Germany merged to form Estel. The 1980's After several years of 'manifest' crisis in the European steel industry, the co-operative arrangement between Hoogovens and Hoesch was dissolved in 1982. The European activities of Kaiser Aluminium were acquired in 1987, making Hoogovens one of the four largest producers of rolled and extruded aluminium in Europe. The 1990's In 1990, the Hoogovens group had five divisions; Steel, Aluminium, Technical Services, Subcontracting, and the newly formed Steel Processing and Trading. In 1999, the trend towards greater rationalization in the European steel industry led to the merger discussions with British Steel. At that time, Koninklijke Hoogovens had 17 business units, around 22,000 employees, a turnover of 4.9 billion Euro, production of 6.7milliontonnes of crude steel and sales of 429,000tonnes of aluminium products .On October 6, 1999, the merger with British Steel to form Corus came into effect. SWOT ANALYSIS OF CORUS : STRENGTHS:The change in management structure due to the privatisation of the British Steel company in 1999 (which created Corus as a result of the merger of British Steel and Hoogovens) led to strengthening the manufacturing company, which, prior to the merger, had suffered serious


cumulative losses between 1975 and 1984. A combination of increased investment, reduced overheads, devolved decision-making and revolutionised working practices has become the foundation of making Corus into one of Europes largest manufacturing companies as of date. The company, spearheaded by Brian Moff at since 1993, used a range of different approaches to global development such as joint ventures (Western Europe and USA), overseas transplants (USA, Eastern Europe and possibly Asia and South America); and continued exports of high-added value products in order to further strengthen their international presence in the manufacturing business.


In the crisis-filled years that Corus suffered, critics have commented that the company has a lack of long-term vision, evidenced by their concentration on small steel ventures in the US, when all the other competitors have been making giant alliance moves in order to give them stronger market positions in developing markets. It has not used its financial strength to spread its operations globally, in this day and time when going global is a key factor to success. Poor management prior to Moffatts administration has also caused the firm a notso-good image with employees, as in 2000, they were forced to reduce their workforce due to radical restructuring of its bulk steel operations.


With the observed inability of Corus to spread operations globally, the opportunity therefore is to take advantage of the increasingly boundless global market in order to not only increase profits for the company, but also to gain market leadership, because it is believed that the manufacturing company has got what it takes to take on a worldwide scale. They also have the opportunity to further increase their production capacities through adoption of systems


which technology nowadays offers, and also to prepare for the increased demand for their products once they decided to conquer the wider international markets. The steel prices that are likely to continue to rise in the future partly as a result of the dynamic Chinese economys effect on world prices should present an opportunity for Corus to utilise to the fullest so that they could realise their true company potentials. With Philippe Varian now in the helm after Moffatts announced his resignation in 2003, opportunity offered by a new organisational structure is also evident.


The strengthening of the pound against European currencies in the second half of the 1990s created a threat for the company, since by that time much of their sales were still in Europe. It is therefore a threat to the firm at this time, when the tug against who is the stronger currency still exists in the market. There is also the threat, not only for the Corus group, but for the whole steel industry as well, of the European rules with respect to opening the market of power generation, which would mean creating an unfair distortion of competition for the industry concerned. Corus Sales and Distribution Corus sells its carbon steel products direct to end users and through its own and external stockholding and service canter businesses. Typically, high-volume purchasers buy directly from Corus mills, while low-volume customers buy from stockholders and service centers, including those owned by Corus. Stockholders purchase steel from steel producers for subsequent resale and service canter purchase steel inventories for further processing prior to selling to customers. Corus has a number of stockholders and service canters in various EU countries. The stockholding and service center sector plays a major role in the distribution of most finished 18

products in the EU steel market. In addition to offering rapid off-the-shelf service to lowvolume customers, major stockholders and service canters, including Corus businesses, increasingly offer further processing facilities to sectors such as the automotive, construction and earth- moves equipment industries. Corus service canter network consists of over 60 service canters across Europe, including in the United Kingdom, Ireland, France, Germany, Italy, The Netherlands, Poland and Spain, which supply and process over 4 million tons of steel and aluminium each year. The Corus International unit is responsible for managing Corus network of sales offices throughout the world. Its trading division operates on a global basis buying and selling steel both internally and externally, while its projects division also operates globally and is responsible for sourcing multi-metal requirements and providing supply chain services on major construction projects. Corus has established a range of branded products across its portfolio. One of the more recent brands, the Advance range of structural sections, was launched in September 2006 following a program of technical improvements at its Scunthorpe and Teesside plants. The key driver for introducing Advance was the requirement, starting in September2006, for structural sections in Europe to comply with the Construction Products Directive .Corus was the first steel company to be allowed to use the CE mark and all Advance sections carry the mark.

TATA Steel Limited Strategies:


REASONS FOR BID :FOR CORUS: Total debt of Corus was 1.6 bn GBP. Corus needed supply of raw materials at lower cost. Though Corus had revenues of $18.06bn, its profits were just$626mn. (TATAs revenue was $4.84 bn & profit $824 mn.) Corus facilities were relatively old with high cost of production Employee cost was 15 %( TATA steel 9%) There was access to cheap high quality iron ore from India.


FOR TATA: TATA was looking to manufacture finished products in a mature market of Europe U.K. undoubtedly is the most mature market in Europe. TATA STEEL manufactured low value long and flat steel products while Corus produced high value striped products. A diversified product mix would reduce risk while higher end product would add to the bottom line. Corus held a number of patents and R&D facility.

Cost of acquisition was lower than setting up a green field plant and marketing and distribution channel. TATA was and is known for efficient handling of labour and it aimed at reducing employee cost and improving productivity at Corus. It had already expanded its capacities in India. It would improve from 55th in World to 5th in production of steel globally. Technology benefits: Being among one of the biggest manufacturers of steel the production facility of Corus was using better technology as compared to Tata Steel. Moreover, Corus was into finished steel production, a technology which was new for Tata Steels. Patents were an added advantage which Corus provided to Tata Steels. Economies of scale: Having acquired Corus, Tata Steels overall production capacity had increased manifold and provided Raw Material at cheaper rates to the Corus Facility from its diverse sources across the world. Acquisitions An acquisition may be in the acquisition of either shares or assets. While not considering the merits and acquisition of assets and the higher stamp duty on the sale of assets. 21

1. FIPB Approval: Under the foreign direct investment policy of the Government of India, a proposal for the acquisition of shares of an India company by a foreign company requires the prior approval of the Foreign Investment Promotion Board (FIPB). However, FIPB approval is not required for the sale and transfer of shares of an Indian company by a person resident outside India (not being a non-resident Indian) to another person resident outside India(not being a non-resident India), provided the transferee does not have a previous venture or investment in India in shares or debentures or a technical collaboration or trade mark agreement in the same or allied field in which the Indian company whose shares are being acquired is engaged. 2. RBI Approval: An acquisition involving transfer of shares from a resident company/Individual to a person not resident in India requires the prior approval of the FIPB and the Reserve Bank of India(RBI). RBI approval is a two-tier process, with an in principle approval (approving the transfer of shares, inter alia, subject to the remittance of the purchase price to the resident company/individual) and thereafter a Final approval. 3. Compliance with the Securities and Exchange Board of India (SEBI) Act, 1992; Acquisition of the shares of a listed company must comply with the requirements under the SEBI act (Substantial Acquisition of Shares & Takeovers Regulations), 1997. 4. Approval of the Department of Company Affairs under CA56: An acquisition of shares in a public company or a private company which is a subsidiary of a public company (Public Company), requires the prior approval of the Department of Company Affairs (DCA), if (1) The acquirer is under the same management as the Public Company


(2) The acquisition would result in the acquirer becoming the holder of more than 25% of the paid up share capital of the Public Company, (3) The acquirer is the owner of a dominant undertaking and there would be, as a result of such acquisition, an increase in the production, supply or distribution of goods produced in India or services rendered in India by the dominant undertaking, or the acquirer would, as a result of the acquisition, become the owner of a dominant undertaking. Further, a transferor holding 10% or more of the nominal value of the equity shares of the Public Company must inform the DCA before transferring one or more of such shares. In some jurisdiction, mergers and acquisitions attract significant antitrust legislation. However, in India, being a dominant undertaking does not, per se, create any antitrust or competition issues. Only an abuse of a dominant market position may create antitrust issues. Tax Considerations: Capital gains tax may be payable on the gains made by the seller on sale of the shares of the company. Also, to enable the transferor company to carry forward its losses, it is essential that at least 51% of the shareholders of the transferor company (prior to the acquisition) beneficially hold at least 51% of the votes on 31st March of each of the future fiscal years in which the past losses are to be carried forward.



I believe this will be the first step in showing that Indian industry can in fact step outside the shores of India in an international marketplace and acquit itself as a global player.


Tata acquired corus, which is 4 times larger than its size and the largest steel producer in the U.K. The deal, which creates the worlds fifth largest steelmaker, is Indias largest ever foreign takeover and follow Mittal steels $31 billion acquisition of rival arcelor in same year. Tata acquires corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence, which is 33.6% higher the first offer which was 455 pence.


Equity contribution from Tata Steel - $3.88 billion Credit Suisse leaded, joined by ABN AMRO and Deutsche provided bank in the consortium. In 2005, Tata Steel was only the world's 56th biggest steel producer and its takeover of Corus represents its first expansion outside Asia. OBJECTIVES OF MERGER & ACQUISITION The main objective of Merger & Acquisition transaction is as follows: Proper utilization of all available resources. To prevent exploitation of unutilized and underutilized assets and resources. Forming a strong human base. Reducing tax burden. Improving profits. Eliminating or limiting the competition. Achieving savings in monitoring costs.

The Deal:
The deal (between Tata & Corus) was officially announced on April 2nd, 2007 at a price of 608 pence per ordinary share in cash. This deal is a 100% acquisition and the new entity will be run by one of Tatas steel subsidiaries. As stated by Tata, the initial motive behind the completion of the deal was not Corus revenue size, but rather its market value. Even though Corus is larger in size compared to Tata, the company was valued less than Tata (at approximately $6 billion) at the time when the deal negotiations started. But from Corus point of view, as the management has stated that the basic reason for supporting this deal were the expected synergies between the two entities. Corus has supported the Tata acquisition due to different motives. However, with the Tata


acquisition Corus has gained a great and profitable opportunity to make an exit as the company has been looking out for a potential buyer for quite some time. The total value of this acquisition amounted to 6.2 billion (US$12 billion). Tata Steel The winner of the auction for Corus declares a bid of 608 pence per share surpassed the Final bid from Brazilian Steel maker Compendia Side surgical National (CSN) of 603 Pence per share. Prior to the beginning of the deal negotiations, both Tata Steel and Corus Were interested in entering into an M&A deal due to several reasons. The official press Release issued by both the company states that the combined entity will have a pro forma Crude steel production of 27 million tons in 2007, with 84,000 employees across four Continents and a joint presence in 45 countries, which makes it a serious rival to other steel giants. The official declaration of the completed transaction between the two Companies was announced to be effective by Court of Justice in England and Wales and consistent with the Scheme of Arrangement of the Tata Steel Scheme on April 2, 2007. According the Scheme regulations, Tata Steel is required to deliver a consideration not later than 2 weeks following the official date of the completion of the transaction. The process has started on September 20, 2006 and completed on July 2, 2007. In the Process both the companies have faced many ups and downs. The details of this process has described below. September 20, 2006: Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer October 5, 2006: The Indian steel giant, Tata Steel wants to fulfil its ambition to expand its business further. October 6, 2006: The initial offer from Tata Steel is considered to be too low both by Corus and analysts.


October 17, 2006: Tata Steel has kept its offer to 455p per share. October 18, 2006: Tata still doesnt react to Corus and its bid price remains the same. October 20, 2006: Corus accepts terms of 4.3 billion takeover bid from Tata Steel October 23, 2006: The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steels bid. October 27, 2006: Corus is criticized by the chairman of JCB, Sir Anthony Bam ford, for its decision to accept an offer from Tata. November 3, 2006: The Russian steel giant several announces officially that it will not make a bid for Corus. November 18, 2006: The battle over Corus intensifies when Brazilian group CSN Approached the board of the company with a bid of 475p per share. November 27, 2006: The board of Corus decides that it is in the best interest of its will Shareholders to give more time to CSN to satisfy the preconditions and decide whether it issue forward a formal offer. December 18, 2006: Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazil's CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel's Offer. January 31, 2007: Britain's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash April 2, 2007: Tata Steel manages to win the acquisition to CSN and has the full voting support form Corus shareholders



Tata Steel has formed a seven-member integration committee to spearhead its union with Corus group. While Ratan Tata, chairman of the Tata group, heads the committee, three of the members are from Tata Steel and the other three are from Corus group.

The acquisition by Tata amounted to a total of 608 pence per ordinary share or 6.2 billion (US $12 billion) which was paid in cash. First of all, the general assumption is that the acquisition was not cheap for Tata.

The price that they paid represents a very high 49% premium over the closing midmarket share price of Corus on 4 October, 2006 and a premium of over 68% over the average closing market share price over the twelve month period. Moreover, since the deal was paid for in cash automatically makes it more expensive, implying a cash outflow from Tata Steel in the amount of 1.84 billion.

Tata has reportedly financed only $4 billion of the Corus purchase from internal company resources, meaning that more than two-thirds of the deal has had to be financed through loans from major banks.

The day after the acquisition was officially announced, Tata Steels share fell by 10.7 per cent on the Bombay stock market. Despite its four times smaller size and smaller capacity, Tata Steels operating profit for 2006, earning $840 million on sales of 5.3 million tons, were very close in amount to those generated by Corus ($860 million in profits on sales of 18.6 million tons).

Tatas new debt amounting to $8 billion due to the acquisition, financed with Corus cash flows, is expected to generate up to $640 million in annual interest charges (8% annual interest cost). This amount combined with Corus existing interest debt


charges of $400 million on an annual basis implies that the combined entitys interest obligation will amount to approximately $725 million after the acquisition. The debate whether Tata Steel has overpaid for acquiring Corus is most likely to be certain, since just based on the numbers alone it turns out that at the end of the bidding conflict with CSN Tata ended up paying approximately 68% above the average price of Corus shares. Another pressing issue resulting for this deal that has created a dilemma between experts and analysts opinions is whether this acquisition for the right moves for Tata Steel in the first place. The fact that Tata has managed to acquire a British steel maker that has been a symbol of Britains industrial power and at the same time its dominion over India has been perceived as quite ironic. Only time will show whether Tata will be able to truly benefit from the many expected synergies for the deal and not make the typical mistakes made in many large M&A deal during this beginning period.

Movement in share price of Tata after acquisition of Corus.



Combined entity has significant market present in both emerging and developed economics.


Particular Year Assets Debt Liabilities Revenue Net income

CORUS Currency :Rupee millions 2006 2005 582750 533925 98100 105525 231300 178425 760500 699900 33900 33450

2004 467775 96000 155475 596475 -22875

TATA STEEL LTD. Currency :Rupee millions 2006 2005 2004 205450.70 177033.70 147988.70 45932.70 42073.10 39982.90 30492.1 33146.80 32665.90 20244.30 159986.10 111294.40 37346.20 36032.60 17887.80

Acquisition Success or Failure?

The following points can be attributed TATA Steel Group rose to 5th position from 56th The production capacity increased from 4million tonnes to 28million tonnes by 2011 Standard & Poors Rating cut it credit Rating to BB from BBB and removed them from the negative watch list Union Problems at Redcars Tee side Plant 30

The 150 year old Redcar plant was to be mothballed costing 1700 jobs May 2009 The deal led by Italian steel specialist Marcegaglia had fallen; which promised to buy around 78% of Redcars production The reason attributed to this is unprecedented fall in demand due to recession in Steel industry Reasons for Success or Failure? Course: SML730 DMS, IIT DelhiOrganisation Management Success - Corus Diversified Presence Aerospace The 2nd largest Automotive Company of Britain Construction and one of the Consumer Products flagship companies of the Britains Defence & Security infrastructure Energy & Power industry Lifting & Excavation Packaging Rail Success - Corus R&D Unit Strong Research & Development Unit Several Patents to its credit Produces high end steel Large Customer base



Why do so few corporations do business the Tata way? There is a catch. First, every singleemployee working for TATA companies, from the CEO to the most recent intern share in the deep values of their leaders, still a guidepost for every new project within the group. Second, Tata companies have evolved a collective commitment to evolving stronger connections between their values and first- in-class business practice not by putting either one ahead of the other, but by finding mutually beneficial bridges between them. In a free enterprise, the community is not just another stakeholder in business, but is in fact the very purpose of its existence. Jamsetji N. Tata (Founder, Tata Group, 1868) The Tata philosophy of management has always been and is today more than ever, that Corporate enterprises must be managed not merely in the interests of their owners, but equally in those of their employees, of the customers of their products, of the local community and finally of the country as a whole. J. R. D. Tata Starting in the early 1990s, the group has invested in structures and processes that would gradually align its pro-social and pro-environmental values with excellence in business endeavors. These efforts culminated in 2003 with the introduction of The Tata Index for Sustainable Human Development, a pioneering effort aimed at directing, measuring and enhancing the community work that assists all TATA companies in their social responsibility efforts. The index had been developed by the TATA Council for Community Initiatives (TCCI), a council of Tata companies CEOs chaired by Mr. Kishor Chaukar, in partnership with TATA Quality Management Services (TQMS). Since June 2004, the Tata Index has


been deployed annually to assure continuous improvement in the delivery of social responsibility initiatives a tthe company level. In 2005, reporting companies averaged almost half of its intended goal, i.e.452.95 points on a 1000 point scale, with companies scoring as high as 712 (Tata Steel). In2006/07, TCS scored 490. Tata Motors, now at 663, was one of the best performers on corporate sustainability within the group. The purpose behind the Index was to seed new benchmarks and motivate continuous Innovation in sustainability across each companys operations. TCCI offered a common platform where each company could share their challenges and achievements with the others and would learn how to nurture stronger internal leadership structures that promoted business excellence the TATA way.

The idea of explicitly tracking social impact originated with Tata Sons. Under the Chairmanship of Mr. Ratan N. Tata, the Group searched for a new way to harness collective synergies among the Tata companies. This led to the Business Excellence Model (TBEM), a detailed business process reform which began formalizing the set of core values that the Tatas had lived by forever a century. One of the offshoots of this effort was the adoption of a more systematic, unified TATA approach to CSR, rooted in Jamsetji Tatas social legacy, and the creation of the Tata Index for Sustainable Human Development, a trendsetting approach to mapping and measuring the social development endeavours of Tata Group companies. The Index itself was a remarkable innovation. First, it broke down sustainability responses in to three nested levels: systems (275/1000), people (175/1000) and program (550/1000), making it easy to measure, and easy to identify areas for improvement.


Source: TCCI, February 2008. Second, the indexation exercise places great emphasis on process not just outcomes. For example, here is how a company might apply the index to its own operations: For each assessment, the Corporate Sustainability Facilitator representing a Tata company and the Community Head for the project would also identify specific opportunities for improvement. These might read: The Company mentions of a regular convention of review. However, it is not clear as to how the review findings are incorporated into Companys strategy. or The Company trains its Facilitators / project leaders for leadership. However, it is not clear how the training imparted is actually benefiting them. or The Company declares under privileged women as its key community. However, there is no evidence on the process of identification of this community. or The Company states that the key community has benefited in terms of self-reliance. However, it is not clear as to how the key community has actually built self-reliance.


Human Resource Innovations:

Over the years Tata Steels have done pioneering innovations in HR stream and have set Standards and benchmarks for the industry to follow. Some of the initiatives started were: 1916- 8 hour workday 1912- Social Welfare Scheme launched for employees 1920- Leave with pay 1934- Profit Sharing bonus 1934- Tata Steel responded to earthquake in its Bihar province with relief supplies 1951- Planned family norms promoted at community level 1970Included Corporate Social Responsibility in its Articles of Association 1958- 225 acre Jubilee park created for the citizens of Jamshedpur 1979- Launched concerted rural development initiatives 1995-Tata Business Excellence Model - makes sustainable growth a priority and has included this in its Key Enterprises Process 1999-Tata Code of Conduct - mandates good governance ethical behavior by organizor organizations as well as each and every employee. 1995 - Tata Council for Community Initiatives provides the superstructure for CSR efforts across the Group. 2003-Tata Index for Sustainable Development - a CSR measure adopted across the Tata Group.

Many landmarks in Labour Welfare:

1915 - Free Medical Aid to all employees and dependent family members 1917 -Welfare Department set up 1956- Joint Consultation instituted with Union Management Agreement 1990- Incentive for Higher Technical Education 35

2001- Family Benefit Scheme 2003 - R D Tata Technical Education Centre 2003 - Initiated process for SA 8000 certification 2004 - Completed 75 years of Industrial Harmony 2004 - Inserted clause against Sexual Harassment in the Works Standing Order


Tata Steel believes that the primary purpose of a business is to improve the quality of life of people. Tata Steel will volunteer its resources, to the extent that it can reasonably afford, to sustain and improve a healthy and prosperous environment and to improve the quality of life of the people of the areas in which it operates. Areas of Impact

Environment Employee Relations Stimulating Economic Growth Civic Amenities & Community Service Population Management Sports and Adventure Health for All Relief During Natural Calamities Education / Arts and Culture


Law applied in merger of Indian companies with foreign firms The Companies Act Amendment Bill, which was tabled in Parliament in the Budget session that adjourned last week, has proposed to allow Indian companies to merge with overseas companies, a move that could introduce greater flexibility in cross-border merger and acquisitions (M&As).

At present Sections 391-394 of the Companies Act, 1956, allow only foreign companies to merge with Indian ones. The Bill has introduced Section 205 that also allows the reverse and stipulates that payment to shareholders of listed Indian companies being merged can be in the form of cash, shares or Indian Depository Receipts (IDRs) issued by the overseas companies.

The amendment was first suggested in 2005 by an expert committee on company law chaired by Tata Sons Director J J Irani. The report had stated that both contract as well as


court-based mergers between an Indian company and a foreign company, where the foreign company is the transferee, needs to be recognized in Indian law.

The committee recognizes that this would require some pioneering work between various jurisdictions in which such mergers and acquisitions are being executed/created.

If this amendment goes through, it will meet a key demand of many multinational companies investing in India.

Legal experts said the merger of an Indian company with a foreign one can help structure M&A deals in many ways. For example, if an overseas company has acquired another foreign company that has a subsidiary in India, the new provision will allow the acquirer to merge the Indian operations with itself, instead of retaining it as a separate entity


Research is a common language refers to a search of knowledge. Research is scientific & systematic search for pertinent information on as pecific topic, infect research is an art of scientific investigation .Research Methodology is a scientific way to solve research problem. It may be understood as a science of studying how research is dont scientifically. In it we study various steps that are generally adopted by researchers in studying their research problem. It is necessary for researchers to know not only know research method techniques but also technology.The scope of Research Methodology is wider than that of research


methods. The research problem consists of series of closely related activities. At times, the first step determines the native of the last step to be undertaken. Why a research has been defined, what data has been collected and what a particular methods have been adopted and a host of similar other questions are usually answered when we talk of research methodology concerning a research problem or study. The project is astudy where focus is on the following points:

A research design is defined, as the specification of methods and procedures for acquiring the Information needed. It is a plant or organizing framework for doing the study and collecting the data .Designing a research plan requires decisions all the data sources, research approaches, Research instruments, sampling plan and contact methods.

The major purposes of exploratory studies are the identification of problems, the more precise Formulation of problems and the formulations of new alternative courses of action. The design of exploratory studies is characterized by a great amount of flexibility and ad-hoc veracity.


Generally there are two sources of data collection viz. Primary Sources and Secondary Sources. The need for data actually emanates from the research objective. It is the research objective which guides the researcher whether the kind of data required would be Primary or a Secondary data will suffice .The project is study based. The aim of the researcher was to understand the milestone deal that happened in the history of Indian Industry . Acquisition of CORUS, one of the largest steel manufacturers in the World, by TATA STEEL, which is much smaller in size. Given the practical limitations of undergoing a


research project which involves such big companies, getting Primary data was a difficult task. Despite the best efforts put in by the researcher to interview the management and finance team of TATA STEEL, there has been no result till date. The researcher has done extensive reading of the available text printed as well as on the internet. Whatever inferences have been drawn is basically derived from the reports given by several research houses and other experts.


The process started on September 20, 2006 and was completed on April 2, 2007. In the process, both the companies have faced many ups and downs. The details of this process have been described below. September 20, 2006 : Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer October 5, 2006 : The Indian steel giant, Tata Steel wants to fulfil its ambition to expand its business further. October 6, 2006 :The initial offer from Tata Steel is considered to be toolow both by Corus and analysts. October 17, 2006: Tata Steel has kept its offer to 455pence per share. October 18, 2006: Tata still doesnt react to Corus and its bid price remains the same. October 20, 2006 :Corus accepts terms of 4.3 billion takeover bid from Tata Steel October 23, 2006: The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter- offer to Tata Steels bid. October 27, 2006: Corus is criticized by the chairman of JCB, Sir Anthony Bam ford, for its decision to accept an offer from Tata. November 3, 2006: The Russian steel giant Several announces officially that it will not


make a bid for Corus. November 18, 2006 :The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475 pence per share. November 27, 2006 :The board of Corus decides that it is in the best interest of its will shareholders to give more time to CSN to satisfy the preconditions and decide whether it issue forward a formal offer. December 18, 2006: Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazil's CSN made its formal counterbid for Corus at 515 pence per share in cash, 3% more than Tata Steel's Offer. January 31, 2007: Britain's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash. April 2, 2007 :Tata Steel manages to win the acquisition to CSN and has The full voting support form Coruss shareholders.

I. Tata Steel's acquisition of Corus was a bold and smart move. Complementary benefits in terms of scale, market geography, financials, technology and raw materials offered a strong rationale for the deal. II. I believe that the acquisition of Corus has been timely. Given the rising momentum of consolidation in the industry and rising valuations of steel companies, had Tata Steel not acted when it did, the opportunity could have been lost forever. III. With Corus in its fold, Tata steel can confidently target becoming one of the top 3 steel makers globally by 2015. The company would have an aggregate capacity of close to 56 million tons per annum, if all the planned Greenfield capacities go on stream by then.



We can conclude that if the acquisition is well planned, executed and the necessary precautions taken for the deal a company can achieve its strategic objectives and thus ensure its growth through acquisitions.


It is notable that the collective earnings of TATA STEEL and CORUS would be able to cater to this interest cost and still save money from the first year of operations itself. The point to note here is CORUS will get access to cheaper raw material which will help in increasing profits and it was also expected that TATA will bring in its superior labour management skills and save on labour cost as well; thereby improving the profit margin.



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