TATA – CORUS “DESIRE DEAL”???

Presented BYShreyas

VaishnaviSuneetha Fernandes

Rakshith kumarVinitha

HORIZONTAL ACQUISITION OF CORUS BY TATA STEEL

COMPANY PROFILE (TATA)

• Established in 1907, Tata Steel is one among the top global steel companies

• It is now one of the world's most geographically-diversified steel producers,

with operations in 26 countries and a commercial presence in over 50

countries.

• Vision - the world’s steel industry benchmark through the excellence of its

people, its innovative approach and overall conduct

• Tata Steel invested in various other businesses as well such as Oil mills,

Airlines, Publishing, Motors, Consultancy services etc.

COMPANY PROFILE (CORUS)

• CORUS was formed on 6th October 1999.It is Europe’s second largest

steel producer with a production of 18.2 million tones and revenue of 9.2

billion.

• Major manufacturing sites in UK, Netherlands, Germany, France and

Belgium & sales/offices centers in over 40 countries

• The product mix consisted of Strip steel products, Long products,

Distribution and building system and Aluminium.

• The Corus was having leading market position in construction and

packaging in Europe with leading R&D

• The Corus was the 9th largest steel producer in the world. It opened its bid

for 100 % stake late in the 2006.

The Tata-Corus Deal

• Tata acquired Corus on 2nd April 2007

• The deal price was US $ 12.04 Billion

• On 17th Oct 2006 Tata bid was priced at 455 pence per Share

(Share Market Price per share at that time was 390 pence)

• TATA acquired 100% stake in the Corus Group at 608 pence

• TATA paid 68% Premium over the average closing market

share price over the twelve month period.

Counter Bid by CSN (Companhia Siderurgica Nacional)

• Tata Steel has made its offer to 455p per share

• The Brazilian Steel Group CSN made counter bid 475p per share

• Within hours Tata Steel increasing its original bid for Corus to

500 pence per share

• Brazil's CSN made its counter bid for Corus at 515 pence per

share in cash, 3% more than Tata Steel's Offer.

• Finally TATA manages to win the battle over CSN by bidding

608p per share.

SWOT analysis of Tata before mergerStrengths• Access to raw materials• Strong brand value• Good Corporate

governance Weaknesses• High debt loads• Operational Inefficiencies• Low demand for existing

products• Less products innovations 

Opportunities• Competitive advantage by

value of size• Access to Corus talent pool• Growth of Infra sector in

India• Higher pricing opportunities

in foreign markets Threats• Advancing technology • International competition• Rising prices of coal

SWOT analysis of Corus

Strength• Wide range of products of high

technology• World’s ninth largest and

Europe’s second largest company

Weakness• Lack of access to raw material• High operational cost

Opportunities• To get access to raw material

through merger• To decrease the overlapping

cost of value chain Threat• Increase in losses result in

winding up of company

Strengths of TATA after merger

• Tata was one of the lowest cost steel producer in the world.

• Self-sufficiency in raw material.

• Strong retail and distribution network in India and South East

Asia.

• Powerful combination of high quality developed and low cost

high growth market.

• Strong culture fit between the two organizations both of which

highly emphasized on continuous improvement and ethics.

Why did Corus accept the bid by Tata Steel?• Backward integration

• Overcome the problems of saturation stage

• Economies of scale

• Increase the revenue of the company

• Reduce the cost of labour

• Excess of loan

Reasons for Tata Steel to bid for Corus

• Expand the market and growth

• Be one of the top companies

• Overcome the weakness

• Economies of scale

• Tap the European market

• Wealth maximisation

• Have a separate research unit

Post-Acquisition

• Tata Steel has formed seven- member integration committee to

spearhead its union with Corus group

• Tata’s new debt has increased amounting to $8 billion

• Tata share fell by 10.7% on the Bombay stock market

• Tata steel group has rose to 5th position from 56th in the global level

• Standard and poor credit rating – BB TO BBB

• Acquisition bought Tata to world platform and to excess new

market in global level

Synergies between the two companies

• Technology transfer and cross-fertilization of R&D capabilities

between the two companies that specialized in different areas.

• Strong culture fit between the two organizations both of which

highly emphasized on continuous improvement and ethics.

• Economies of scale and increase in profitability.

• Acquisition would result in powerful combination of high

quality and low cost growth markets.

Did Tata Overbid For Corus?A) Viewpoint of Financial analyst

• Financial analysts familiar with the acquisition are of the

viewpoint that Tata Steel overpaid for Corus.

• Post acquisition Tata Steel’s share price fell by 10.7

percent to Rs. 463.95 in the Bombay Stock Exchange.

• Tata Steel picked up the responsibility of ensuring the

funding of over 47,000 pension funds of Corus’s

employees.

Conti…. B) Viewpoint of Tata Steel’s Executives

• Tata Steel executives are of the opinion that there were many

favorable strategic and financial outcomes to be realized.

• The acquisition added 19 million tons of production capacity and

savings of $350 million .

• Potential to create cross-fertilization of R&D capabilities in the

automotive, packaging and construction sectors with transfer of

technology, best practices and personnel from Europe to India.

• Cash flows generated post merger would be more than sufficient

to meet the debt incurred due to the acquisition.

Corus is now TATA steel Europe• Head quarters - Landon• Product – Steel products and services• Markets – Consumer products, energy and power

packaging, automobile, aerospace and other small industries.

• Recent Update – improving the products using decoiler of 11 millon pound.

Financial report

Financial Report

Learning from the deal

• Growth and development

• Better performance

• Wealth maximisation

• Recognition in the global market

• Learning experience

• Be a leader by initiating