Tata Corus acquisition
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Transcript of Tata Corus acquisition
Group2Sameep Kunja (2011SMN6501)Anita Singh (2011SMN6504)Leena Sadhu (2011SMN6538)Piyush Bajpayee (2011SMN6539)Souptik Sarkar (2010CEC3850)
Tata-Corus Acquisition
DMS, IIT DelhiCourse : SML730Organisation Management
Former Name : Tata Iron and Steel Company
Parent : Tata Group
Type : Public BSE (500470)
Founded : 1907
Chairman : Ratan Tata
Industry : Steel
Course : SML730Organisation Management
DMS. IIT Delhi
Overview of the Acquirer
Founder : Jamshedji Tata
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Headquarter : Jamshedpur, Jharkhand, India
Name : Corus
Parent : Tata Steel, member of Tata Group
Type : Subsidiary
Founded : 1999
CEO : Kirby Adams
Industry : Steel
Course : SML730Organisation Management
DMS. IIT Delhi
Overview of the Acquired
Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V.
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Headquarter : London, England, UK
Course : SML730 Organisation Management
DMS, IIT Delhi
Reasons for Acquisition
• To tap European mature market• Cost of acquisition is lower than setting up
green field plant and marketing and distribution channel.
• Tata manufactures low value long and fast steel products while Corus produced high value stripped products
Reasons for Bid from Tata Steel
• Acquisition would help Tata to feature in top 10 players in the world.
• Technology benefit• Economies of scale• Corus held a number of patents and R&D
facilities
Reasons for Bid from Tata Steel
• Saturated market of Europe• To extend its global reach through Tata• To get access to low cost Indian Ore
reserves• Decline in market share and profit• Total debt of Corus was 1.6 Bn GBP• Facilities were old with high cost of
production
Reasons From Corus to accept the Tata Bid
Course : SML730 Organisation Management
DMS, IIT Delhi
How the Acquisition was Implemented
• 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
The Tata-Corus DealStatistics
• A holding company was setup by Tata in Singapore to acquire Corus.
• Idea was to have all foreign acquisitions under one holding company.
• Singapore has a favorable Tax jurisdiction and gave Tata Steel an easy avenue for raising global resources and funds
The Tata-Corus DealInvestment Vehicle
The Tata-Corus Deal
Tata Steel India
Tata Steel Holdings Asia (Singapore)
Tata Steel UK (SPV)
Corus Group Ltd. (UK)
• Appointing Advisors• Negotiating Terms• Due Diligence• Exchange of contracts• Completion
The Tata-Corus DealProcess of Acquisition
Ratan Tata – Chairman of Tata Steel on Acquisition
“This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion. Corus and Tata Steel are companies with long, proud histories. We have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread. Together we will be even better equipped to remain at the leading edge of the fast changing steel industry.”
Course : SML730 Organisation Management
DMS, IIT Delhi
Was The Merger a Success or a Failure?
The following points can be attributed:• TATA Steel Group rose to 5th position from 56th
• The production capacity increased from 4million tonnes to 28million tonnes by 2011
• Standard & Poor’s Rating cut it credit Rating to BB from BBB and removed them from the negative watch list
Merger – Success or Failure?
• The 150 year old Redcar plant was to be mothballed costing 1700 jobs – May 2009
• The deal led by Italian steel specialist Marcegaglia had fallen; which promised to buy around 78% of Redcar’s production
• The reason attributed to this is unprecedented fall in demand due to recession in Steel industry
Union Problems at Redcar’s Teeside Plant
Course : SML730 Organisation Management
DMS, IIT Delhi
Reasons for Success or Failure?
• Aerospace• Automotive• Construction• Consumer Products• Defense & Security• Energy & Power• Lifting & Excavation• Packaging• Rail
Success - Corus’ Diversified Presence
• The 2nd largest Company of Britain and one of the flagship companies of the Britain’s infrastructure industry
• Strong Research & Development Unit
• Several Patent’s to its credit
• Produces high end steel
• Large Customer base
Success - Corus’ R&D Unit
• Big boost to the Indian economy, as TATA was acquiring a company 3 times its size
• The R&D Unit of Corus complements that of TATA’s
• Links low cost Indian production and raw materials and growth markets to high margin markets and high technology in the West
• Help from financing institutions as $8 billion was raised through debt
TATA’s Implementation of the Deal
• Tata Steel Stock Price
Statistics
• Tata Steel Europe Stock Price
Statistics
• Net debt fell from $10.43 billion in June, 2010 to $9.13 billion in March, 2011
• Tata Steel Group recorded profit after tax of Rs5,347 crores in Q1 FY’12, almost three times the profit of Rs1,825 crores recorded in Q1 FY’11
Statistics
Acquisition - A SUCCESS
Verdict
THANK YOU!