1. 1.

TATA STEELS ACQUISITION OF CORUS

2. 2. OUTLINE TATA STEEL background CORUS background Rationale for the
acquisition Synergies expected from the deal Funding structure of the deal Longterm implications of the deal
3. 3. TATA STEEL BACKGROUND A part of TATA Group of Companys.
Formerly known as TISCO and TATA IRON AND STEEL COMPANY LIMITED.
Located in Jamshedpur, Jharkhand, India. Worlds 7th largest steel company.
Indias 2nd largest and 2nd most profitable private sector company. Data as per
March 31, 2008 Capacity = 31 million tones Revenues = 132,110 crore Net profit =
12,350 crore
4. 4. CORUS BACKGROUND One of the largest steel companies in Europe. Came
into being in 1999 with the merger of British Steel plc and Dutch steelmaker. Also
has a presence in The Netherlands, Germany, France, Belgium, the United States, and
Canada. The company manufactures, processes, and distributes metals products to
the construction, automotive, mechanical engineering, packaging, and other markets.
5. 5. THE ACQUISITION AND THE RATIONALE BEHIND IT Rationale TATA
CORUSTo tap mature European market. To extend its Global reach
throughHelped TATA to feature in Top 10 TATA.players in world. To get access
to Indian OreTechnological benefits. reserves, as well as virgin market forCorus
holds number of patents and steel.R&D facilities. To get access to low cost
materials.Cost of acquisition is lower than Saturated market of Europe.setting up
of Green field plant & Decline in market share and profit.marketing and distribution
channel.TATA manufactures Low Value, longand flat steel products ,while
Corusproduce High Value Strippedproducts.
6. 6. SYNERGIES EXPECTED FROM THE DEAL Tata was one of the lowest cost
steel producers & Corus was fighting to keep its productions costs under control.
Tata had a strong retail and distribution network in India and SE Asia. Hence there
would be a powerful combination of high quality developed and low cost high growth
markets Technology transfer and cross-fertilization of R&D capabilities. There
was a strong culture fit between the two organizations both of which highly
emphasized on continuous improvement and Ethics. Economies of Scale. Increase
in profitability. Backward integration for Corus and Forward integration for Tata
Steel.
7. 7. FUNDING STRUCTUREIt was a CASH DEAL because- Immediate takeover
was required. Share Swap deal would have been less attractive to the Corus
shareholders. Share Swap would have meant FDI and that brings a lot of regulatory
hassles which might not have been accepted by Corus shareholders. Share Swap
would have diluted Tata Steels Equity base which was not in favor of Tata
shareholders. And moreover cost of equity at around 15% is higher than that of debt
of around 8%, so paying in cash brings down the cost of acquisition.Equity + Loan =
Deal$3.95 + ($3.654 + $2.233 + $2.233) = $12.07
8. 8. LONG - TERM IMPLICATIONS Integration has to be fast and efficient.
Increasing reach to joint entity to 4 continents and 45 countries including high value
market of Europe. Increasing the EBITDA to 25% for joint entity by executing Tata
steels brownfield and greenfield projects well in time. Increasing the capacity of the
company beyond 50 million tons by 2015 so as to become one of 3 top steel producers
in the world.