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Tata - Corus Final Ppt.

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Page 1: Tata - Corus Final Ppt.
Page 2: Tata - Corus Final Ppt.

ABOUT CORUS

Corus Group Plc was formed on 6th October 1999,

through the merger of two companies : British Steel

Plc & Koninklijke Hoogovens

Corus comprised of 4 divisions with manufacturing

operations in many countries

Europe 2nd largest steel producer with revenues in

2005

Page 3: Tata - Corus Final Ppt.

SWOT Analysis of Corus

- High Operational Cost- Lack of Access to Raw Material

- To get access to Raw Material growth markets through mergers- To merge with a company to eliminated duplication & remove overlaps in marketing & accounting etc.

- Increasing losses resulting to winding up of the company.

SWOT

Page 4: Tata - Corus Final Ppt.

REASONS FOR CORUS FOR ACCEPTING THE BID

To extend its Global reach through TATA

To get access to Indian Ore reserves as well as virgin

market for steel

To get access to low cost materials

Saturated market of Europe

Decline in market share & profit

Total debt of Corus is 1.6bn

Corus needs supply of Raw Materials at lower cost

Page 5: Tata - Corus Final Ppt.

5 oct 06• Corus board announced that it has

received the proposal from Tata steel for 455 pences per share

28 oct 06 • Valuing Corus share at 4.3 billion pound

17 Nov 06• CSN approached Corus regarding the

proposal And made counter offer of 475 pence per share

Tata Steel Increased the bid to 500 pence per share• TATA then again made another offer of

500 pence per share

11 DEC 06• CSN increased the bid to 515 pence per

share

28 DEC 06• UK panel on takeovers and mergers

announced last date to bid 30 Jan 200726 jan 07

• UK takeover panel established an Auction procedure Commence at 4.30 Pm (London time) on January

31 jan 07

• After bidding tata win the offer by bidding at 608 pence per share Compared to CSN who bid at 603 pence per share

• Tata is the final winner of the deal

Page 6: Tata - Corus Final Ppt.

Funding pattern

US $ 13.90 BILLION

12.90 $ BILLION PAY TO SHAREHOLDRES

800 MILLION ON BALANCE SHEET

Page 7: Tata - Corus Final Ppt.

$ in billion

6.142.664.9

High yeild and long term debt fundingBank ABN Amro 27.5%Deutsche bank 27.5%Credit Suisse 45%Cash reserve $700 millionCommercial borrowing $500 million

Page 8: Tata - Corus Final Ppt.

Mobilizing fund

Issue of equity shares and warrants convertible fetched US $640 million.

Right issue of Tata Steel was 1:5 at 300 per share fetched US $860 million.

Right issue of convertible preference shares in ratio of 9:10 price 600 per share US $ 1.300 to 1.325 billion.

Equity issue as Foreign Currency Convertible alternative Securities for US $800 million.

Page 9: Tata - Corus Final Ppt.

Merits Tata Steel had planned well for funding. By issue of rights they were trusting shareholders and

increasing there share holding. The funding was in such a way that debt were restricted in

balance sheet of Tata steel. They used great way of equity and debt combination.

Demerits It was very risky for Tata steel as its most of funds were

from equity issue. It will take long time to pay the debts as they were huge. If some uncertainty happens Tata wont be able to pay to

there shareholders.

Page 10: Tata - Corus Final Ppt.

DO YOU THINK ACQUISITIONOF CORUS WAS A SOUND

BUSINESS STRATEGY

Page 11: Tata - Corus Final Ppt.

Strong market baseA jump from 56th to 5th global positionStrong distribution networkBetter bidding for raw material pricesResearch and development

Page 12: Tata - Corus Final Ppt.

To have the production capabilities in the export markets,

To take on multinational rivals, & thwart a possible hostile takeover threat

will be able to supply semi- finished steel to corus for converting into high value added products

negotiation on raw material prices Two alternatives

◦ manufacture primary steel in india and ship semi finished steel to corus’s finishing plant

◦To relocate some of the corus’s capacity to India

Page 13: Tata - Corus Final Ppt.

Tata Steel could leverage upon corus’s expertise in making high grade steel,

Corus had much better R&D capability than Tata Steel.

Page 14: Tata - Corus Final Ppt.

The Flip Side Corus EBITDA at 8% was much lower than Tata

Steel.Tata Steel paid 68.7 % premium, EPS for nine months was 37 pence per share,So P/E of approximately 16.5 higher than industry

average of 6 to 8.Corus enterprise value was overvalued.Combined entity has become highly leveraged due

to increase in debt in its capital structure.post acquisition Tata Steel would no longer remain

as the lowest- cost producer of steel.

Page 15: Tata - Corus Final Ppt.

The Road AheadAfter the acquisition , the European

market contribute to the sales of 59 % of the merged entity.

Tata steel got access to the developed market of Europe.

Page 16: Tata - Corus Final Ppt.

BCG MATRIX

Page 17: Tata - Corus Final Ppt.
Page 18: Tata - Corus Final Ppt.

ANSOFF’S GROWTH STRATEGY

MATRIX

Page 19: Tata - Corus Final Ppt.
Page 20: Tata - Corus Final Ppt.

Tata corus Tata corus

India 69% Europe 49% Europe 37%

Asia 23% UK 29% UK 24%

Rest of the world 8%

North America 10%

North America 22%

Asia 9% Asia 8%

Rest of the world 3%

Rest of the world 9%

Spread of Market before and after acquisition

Page 21: Tata - Corus Final Ppt.

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