Tata and Corus: A Case of Acquisition
Tata and Corus: A Case of Acquisition
Tata and Corus: A Case of Acquisition
ACQUISITION
By
Supreet kaur(177780592108)
COMPANY PROFILE (TATA)
Established in 1907, Tata Steel is among the top ten 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.
The Tata Steel Group, with a turnover of US$ 26.13 billion in FY 2011- 2012, has over 81,000 employees
across five continents and is the FIRST in
Tata Steel invested in various other businesses as well such as Oil mills, Airlines, Publishing, Motors,
Consultancy services etc.
SWOT OF TATA
Pre-merger 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
SWOT OF CORUS
REASONS FOR TATA STEEL TO BID
Cost of acquisition is lower than setting up of green field plant and marketing and distribution channel.
TATA manufactures low value, long and flat steel products while Corus produced high value stripped
products.
Technology benefit.
A chance to bail out of debt and financial crisis. Total debt of CORUS was 1.6bn GBP.
Though Corus has revenues of $18.06bn, its profit was just $626mn
TATA steel acquisition of CORUS was a bold and smart move. Complementarities in scale, market
geography, financials, technology and raw materials offered a strong rationale for the deal.
The acquisition of CORUS has been timely done. Given the rising momentum of consolidation in the
industry and rising valuations of steel companies, had TATA steel not acted when it did, the opportunity could
have been lost forever.
SYNERGIES EXPECTED FROM THE DEAL
Tata was one of the lowest cost steel producers & Corus was fighting to keep its productions costs under
control.
Tata had a strong retail and distribution network in India and SE Asia. Hence there would be a powerful
combination of high quality developed and low cost high growth markets
There was a strong culture fit between the two organizations both of which highly emphasized on
continuous improvement and Ethics.
Economies of Scale.
Increase in profitability.
Backward integration for Corus and Forward integration for Tata Steel.
DUE DILIGENCE ( GRAPHS)
ASSETS
LIABILITIES
NET INCOME
REVENUE
How the Acquisition was Implemented
The Tata-Corus Deal
Statistics
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 Deal
Was The Acquisition a Success or a
Failure?
Acquisition– Success or Failure?
The production capacity increased from 4 million tones to 28 million tones by 2011
Standard & Poor’s Rating cut it credit Rating to BB from BBB and removed them from the negative watch
list
Reasons for Success or Failure?
Success - Corus’ R&D Unit
The 2nd largest Company of Britain and one of the flagship companies of the Britain’s infrastructure
industry
Aerospace, Automotive, Construction, Consumer Products, Defense & Security, Energy & Power,
Lifting & Excavation, Packaging, Rail
TATA’S IMPLEMENTATION OF THE DEAL
Big boost to the Indian economy, as TATA was acquiring a company 3 times its size
Links low cost Indian production and raw materials and growth markets to high margin markets and high
technology in the West
Acquisition - A SUCCESS