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ACQUISITION OF
CORUS
CASE STUDY
RATAN TATA, CHAIRMAN OF TATA STEEL, SAID:
Hoogovens
Corus has manufacturing operations in many
Belgium
The company produced around 18 million tonnes
Europe
India Asia
Asia (ex 8% 9% 37% UK
8%
23% India) 22% North
ROW America
69%
24% ROW
ACCESS TO NEW MARKET
Combined Entity has significant market presence in both emerging and developed
economies
Source :- Tata Steel FY 2005-06 Annual Report & Corus 2005 Annual Report
SWOT ANALYSIS OF TATA
STEEL:
Strengths Weakness
1. Lowest Cost 1. Corus was triple
Producer in the size of TATA
world steels in terms of
2. Experience of production
TATA group in 2. Quality of Steel
doing global was not of
acquisitions International
3. Low debt to standards
equity ratio
SWOT ANALYSIS OF TATA
STEEL
Opportunities Threats
1. To get exposed 1. Brazilian player
to the global CSN
steel market 2. Russian player
( will save time Severstal
and learning
space for them)
2. Consolidation
trend in Steel
Industry
SWOT ANALYSIS OF CORUS
Strengths Weakness
1. World’s ninth
largest and Europe’s
1. Corus was
second largest steel
producer bleeding because
2. Wide range of of high
products operational costs
3. Presence of
operating facilities 2. Low operating
spread in whole EU margin
SWOT ANALYSIS OF CORUS
Opportunities Threats
1. Consolidation 1. Huge pension
trend in Steel liability might
Industry have led to
2. To get right price collapse of the
at a time when deal
market is less 2. Disagreement of
volatile Labor and
government due
to possibility of
job cut
TOP TEN PLAYERS IN STEEL
INDUSTRY
S.NO. COMPANY CRUDE STEEL PRODUCTION (in
million tons)
1 Arcelor Mittal 109.7
5 Tata Corus 27
8 Nucor 18.4
9 Riva (Italy) 17.5
Tata Steel
100 %
25000 24348
19654
20000
17452
15132
15000 14489
sales
10000 PAT
4687 5202
5000 3474 3506 4222
0
2004-05 2005-06 2006-07 2007-08 2008-09
KEY FINANCIAL RATIOS
2009 2008 2007 2006 2005
Dividend / 16 16 15.5 13 13
share
20.55 20.83
foreign
Domestic
Institutions
58.16
VALUING THE ACQUISITION
EBITDA can be used to analyze and compare
profitability between companies and
industries because it eliminates the effects
of Financing and accounting decisions.