Group – 3Akhil Prakash PGP14004Gaurav Kumar PGP14019Harshit Gupta PGP14021Sudhanshu Singh PGP14051Suneha Anand PGP14052Akhilesh Dubey PGP14057

Tata Steel's Acquisition of Corus

Corus Group• It was formed on 6th October 1999

• 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 Corus was the 9th largest steel producer in the world. It opened its bid for 100 % stake late in the 2006

Companies Background

Tata Steel• Established in 1907, it is among the top ten

global steel companies

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

• It operations in 26 countries and a commercial presence in over 50 countries

• Tata Steel invested in various other businesses as well such as Oil mills, Publishing, Motors, Consultancy services etc.

Corus Group• Saturated market of Europe

• To extend its global reach through Tata steel

• To get access to low cost Indian Ore reserves

• Decline in market share and profit

• Total debt of Corus was 1.6 Billion

• Corus facilities were relatively old with high cost of

production.

Reasons for AcquisitionTata Steel

• Saturation in Domestic Market; thus overseas expansion

• Global ambitions: Tata Steel now placed from 55th to 5th in global steel production

• Lower Cost of acquisition than setting a green field plant and marketing & distribution channels in Europe.

• Corus's Strength in the European Markets

• New Product Segment: Tata Steel manufactured low value long and flat steel products whereas Corus produced high value stripped steel products.

• Knowledge Acquisition: Corus had a strong R&D department. It also possessed a number of patents for various processes of steel industry.

• Tata acquired Corus on 2nd April 2007

• The deal price was US $ 12.11 Billion

• On 17th Oct 2006 Tata bid was priced at 403 pence per share (Market Price per share at that time was 390 pence)

• Tata Steel winner of the auction for Corus declares a bid of 608 pence per share

• Tata surpassed the financial bid from Brazilian Steel Maker – COMPAHNIA SIDDERUGGICA NACIONAL (CSN) – of 603

pence per share

Tata Corus Acquisition Deal

Strategic Viewpoint behind acquisition: Europe acted as a mature market that gave TATA the latest technologies for value additions at reduced costs in the middle of the value chain as well as a very strong distribution channel in the end of the value chain.

Synergy Expected: The companies specialized in different areas of the value chain. Combining them would give them a sustainable and highly profitable operation. There was also a strong culture fit between the two organizations both of which highly emphasized on continuous improvement and ethics.

• Post internationalization performance is measured by:– Financial Analysis– Resolving Human resource related issues– Relative performance (compared to competition)– Synergy realization

Post Internalization: Situation of Tata Steel

• The timing of International expansion is very crucial.

• Level of synergy that exists between the two companies.

• Tata steel acquired a company that served different markets. As such the markets were complimentary to each other and would result in opening up of new markets for Tata Steel.

• Also products offered by Corus were at the upper end of the value chain, as such there was very less chance of cannibalization

• Operationally Tata was the lowest cost steel producer in the world. And Corus had very well developed R&D department.

• Prior experience in handling of overseas operations is always very useful.

• Care should be taken while predicting the future movement of the industry. In this case, Tata betted on the rising prices but there was an economic slowdown which pulled the steel industry down with it.

• Bigger the expansion greater is the time required for synergies to materialize.

• Another important factor is how the post expansion integration is carried out. Tata adopted a light integration policy initially but due to economic slowdown had to take some strict steps.

• Management of human resources.

Key Learnings