...Tata - Corus –A case of Acquisition Submitted To: Dr.R.Sahu By : Jitesh Maharwal(2004 IPG 29 ) Nikhil Garg(2004 IPG 44) Harendra Singh(2004 IPG 83) Sunny Tyagi(2004 IPG 83) Contents TATA & CORUS: A Case of Acquisition .......................................................................... 3 Steel Industry Background .............................................................................................. 6 Tata and Indian Steel Industry ........................................................................................ 9 SWOT Analysis: ....................................................................................................... 11 Global Steel Industry .................................................................................................... 12 Competition: US, Europe and Emerging Markets ........................................................ 12 Corus and Steel Production in the U.K ......................................................................... 13 Restoring Success ..................................................................................................... 14 SWOT Analysis: ....................................................................................................... 14 The Deal ........................................................................................................................ 16 Structuring and Pricing a deal .............................................................................
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...AN ASSIGNMENT ON MERGER AND ACQUISITION OF Tata Steel and Corus BY Lokesh Bhatiya 09MBA02 SEMESTER 4 INTRODUCTION: STEEL INDUSTRY Contribution in the development of India’s economic growth: The Indian steel industry is more than 100 years old now. The first steel ingot was rolled on 16th February 1912 - a momentous day in the history of industrial India. Steel is crucial to the development of any modern economy and is considered to be the backbone of the human civilization. The level of per capita consumption of steel is treated as one of the important indicators of socio-economic development and living standard of the people in any country. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flow and income generation. All major industrial economies are characterized by the existence of a strong steel industry and the growth of many of these economies has been largely shaped by the strength of their steel industries in their initial stages of development. India is the seventh largest steel producer in the world, employing over half a million people directly with a cumulative capital investment of around Rs. one lakh crore. It is a core sector essential for economic and social development of the country and crucial for its defense. The Indian iron and steel industry contributes about Rs.8,000 crore to the national exchequer in the form of excise and custom...
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...The Tata Corus merger has made Tata Steel the fifth largest steel manufacturer in the world. This is the biggest foreign takeover by an Indian company. Tata and Corus are both happy with the merger and Tata steel is likely to reap many benefits from this deal. The Tata Corus merger has earned Indian steel giant the status of the fifth largest steel manufacturer of the world. Described as the biggest foreign takeover by an Indian firm by BBC, the deal was values at an estimated $11 billion. The two parties had agreed at a value of 455 pence per share of Corus. Earlier in 1999, Corus was formed by a merger of Hoogovens, a Dutch group and British Steel. Tata steel, on the other hand has been India's leading steel manufacturer. Corus had held discussion with Indian, Russian and Brazilian firms for this merger. The ultimate deal with Tata was described as "the right partner at the right time at the right price and on the right terms" by Jim Leng the chairman of Corus. For the Tata chairman Ratan Tata it was a "defining moment. As a part of the deal Tata also contributed to the Corus pension fund. The Tata Corus merger is expected to provide an estimated $400 million worth of savings to Tata Steel in three years time. The estimated savings till March 2008 is 130 million dollars. A prime reason for such high volumes of savings is the availability of cost saving technology through this acquisition. According to Mr. B. Muthuraman, managing director of Tata Steel, a breakthrough technology...
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...Tata Group is following policy of growth strategy based on Mergers & Acquisitions. So, Corus takeover is a part of a whole series of mega acquisitions in diverse areas since 2000. Tata Steel's acquisition of Corus of the UK clearly reinforces the strategic logic dictating `consolidation' in the highly fragmented steel industry. The historic merger of Arcelor and Mittal Steel laid the foundation for this deal. For Tata Steel, which has been pursuing inorganic growth in the Asian region for a while, the move into Europe appears to go well with its strategy of global growth. Tata steel chose the equity mode to enter the European market. Equity mode or Foreign Direct Investment is the principle way in which firms enter and compete in the modern global economy. Acquisition is the part of FDI. The acquirer inherits the company’s strategic assets (managerial, technological, and marketing resources), without having to build them from scratch, as would be the case when setting up overseas operations through Greenfield investment. Increasingly, acquiring strategic assets have become a motivation for OFDI from emerging economies Tata have chosen Acquisition for many reasons. Some of these reasons can be explained by theory, while others not. Now we will discuss the prime motives that encourage Tata to adopt aggressive Acquisition policy while entering European Steel Market. The main advantages to Tata by choosing Acquisition are as follows: Economy of scale: This acquisition...
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...TATA-CORUS MERGER * The Tata Steel's bid for Corus Steel, the first multi-billion dollar bid for an overseas company, is considered as a landmark case in Indian corporate history. * The Tata Steel's interest in acquiring Corus is in line with its growth objective of entering new, higher end markets and acquiring sophisticated customer base. * Enhanced scale have positioned the combined group as the fifth largest steel company in the world by production and have created vertically integrated global steel company with crude steel output of more than 23 Million Tonnes. * The company would required support of half of the shareholders present at the meeting and 75% of shares in value. * Cost concerns forced Corus to search for a strategic partner. Tata steel is the world's lowest cost producer of steel, while Corus's cost of production is almost twice that of Tata Steel. The deal was finalized on the 31st of January 2006 at an extraordinary general meeting held by Corus. * The climate at the time of Tata’s acquisition of Corus was characterized by an “eat-or-beeaten” mentality in which steel companies increasingly had to decide whether to be an acquirer or an acquisition target. These mergers and acquisitions were expected to eventually result in a handful of worldwide global giants in the steel industry. Merger and acquisition activity in the world steel industry was likely to result in a higher degree of pricing stability and better margins for the steel...
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...Finance II Professor. Nobuya Takezawa Individual Research Paper Tata’s Corus Valuation By: S Murali Manikandan Tata’s Corus Valuation Introduction: Tata Steel was established by an Indian, Jamshetji Nusserwanji Tata in 1907. Though he died in 1904, before the project came to light, he sowed the seeds for a company that can stand the test of times. A century later, they took over Corus to become the 5th largest steel producer in the world. On January 31st 2007, Tata Steel took over Corus for USD 12.11 Billion. It took 9 rounds of bidding against a Brazilian competitor, CSN to seal the deal. The deal between Tata and Corus was officially announced on April 2nd 2007 at a price of 608 pence per common share in cash. It was a 100% acquisition and a new entity was born, to be run by one of Tata’s subsidiary in London. When the acquisition process started off in 2005, the initial offer was 455 pence and finally ended with Tata paying 608 pence, which is 33.6% more than the initial offer. This raises many an eyebrows about the final price. What transpired between 2005 and 2007? Was 608 pence/share a fair price? Steel Industry Tata Steel has its own mines and manufacturing units for the production of all kinds of steel. Steel is an alloy consisting mostly of iron, with carbon content between 0.2% and 2.1% by weight depending on the grade. Iron, like most metals, is found in the Earth's crust only in the form of an ore, i.e. combined with other elements such...
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...Case Study analysis TATA-CORUS:- Q.1. What are the benefits of the TATA-CORUS merger deal to the stakeholders of TATA Steel and the stakeholders of CORUS? Evaluate the post-merger security with the help of CAPM Model. A.1. On January 31st, 2007 India’s Tata Steel acquired Corus, the erstwhile British Steel Major at a price of 608 pence per Corus share totaling $12.1 billion/ Rs 54,000 crore/ £6.1 bn, which was five pence per share higher than the offer of Brazil’s CSN (Companhia Siderugica Nacional). The deal is the largest Indian takeover of a foreign company, and creates the world's fifth-biggest steel company from the present 56th rank. Benefits of TATA-CORUS merger deal to the stakeholders of TATA Steel Short-Term Implications Investors with a one-to-two year perspective may find the Tata Steel stock unattractive at current price levels. While the potential downside to the stock may be limited, it may consolidate in a narrow range, as there appears to be no short-term triggers to drive up the stock. The formalities for completing the acquisition may take three to four months, before the integration committees get down to work on the deal. In our view, three elements are stacked against this deal in the short run: 1) Equity dilution: The financing of the acquisition is unlikely to pose a challenge for the Tata group, but the financial risks associated with high-cost debt may be quite high. Though the financing pattern is yet to be spelt out fully, initial...
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...TATA & CORUS: A Case of Acquisition “There are not many opportunities for producers in emerging low-cost markets to gain access to the markets of Europe other than by acquiring a company like Corus,” John Quigley (Editor, Industry Publication Steel week) Thousands of Indians didn’t offer prayers for Tata Steel to clinch the deal for the AngloDutch steel maker Corus, as they have for the recovery of hospitalized Bollywood superstars. Nor did they erect 40-foot billboards of a smiling Ratan Tata, chairman of Tata Steel, after he won Corus. And the stock markets were clearly concerned about the Tata Steel’s new debt load. But despite all this, euphoria gripped the nation. Finance minister P. Chidambaram offered unspecified help, if needed, to close the deal; fellow steel magnate Lakshmi Niwas Mittal cheered the acquisition, and excited TV newsreaders gushed. India’s first Fortune 500 MNC was born. Tata acquired Corus, which is four times larger than its size and the largest steel producer in the U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the same year. Over the past five years, Indian companies had made global acquisitions for over $10 billion. The Tata bid almost equals this amount. Most of them have averaged $100 to 200 million. "It is a two-way street now," Kamal Nath (Commerce Minister, India) said. "Not only India is seeking foreign...
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...TATA & CORUS: A Case of Acquisition “There are not many opportunities for producers in emerging low-cost markets to gain access to the markets of Europe other than by acquiring a company like Corus,” John Quigley (Editor, Industry Publication Steel week) Thousands of Indians didn’t offer prayers for Tata Steel to clinch the deal for the AngloDutch steel maker Corus, as they have for the recovery of hospitalized Bollywood superstars. Nor did they erect 40-foot billboards of a smiling Ratan Tata, chairman of Tata Steel, after he won Corus. And the stock markets were clearly concerned about the Tata Steel’s new debt load. But despite all this, euphoria gripped the nation. Finance minister P. Chidambaram offered unspecified help, if needed, to close the deal; fellow steel magnate Lakshmi Niwas Mittal cheered the acquisition, and excited TV newsreaders gushed. India’s first Fortune 500 MNC was born. Tata acquired Corus, which is four times larger than its size and the largest steel producer in the U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the same year. Over the past five years, Indian companies had made global acquisitions for over $10 billion. The Tata bid almost equals this amount. Most of them have averaged $100 to 200 million. "It is a two-way street now," Kamal Nath (Commerce Minister, India) said. "Not only India is seeking foreign...
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...SAHARA INDIA AND FORCE INDIA New Delhi: Sahara Group chairman Subrata Roy acquired a 42.5% stake in Force India, the Formula One team owned by liquor baron Vijay Mallya, for $100 million. Sahara Group’s Subrata Roy. By Abhijit Bhatlekar/Mint The sale of new shares to Roy will bring Mallya’s stake in Force India down to the same level—42.5%. Force India will be renamed Sahara Force India and Roy will take over as the chairman of the company, while Mallya will continue to be the principal and managing director of the team that is now ranked sixth in the constructor’s championship with 48 points. “No shareholders sold stakes and the entire $100 million will go to the team,” Mallya said. “This partnership will enable the team to invest in technology. There is no scope for any other stakeholder to come in, but we are open for sponsorships.” Mallya said he approached Roy and the deal was completed in record time. The decision to sell the stake will help Mallya, who owned 75% of Force India before Roy’s investment, infuse funds into the racing team as he struggles to turn around other companies controlled by him, including Kingfisher Airlines Ltd. The development comes weeks after Mallya said Kingfisher Airlines will exit the low-fare segment that will do away with the Kingfisher Red unit. The capital-starved Kingfisher Airlines, which hasn’t made a profit since its inception in 2005, had debt of Rs 7,057.08 crore as on 31 March. It posted a loss of Rs 1,027 crore on sales of...
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...Management Report on Case 2: Tata Steel Table of Content Company Overview……...….…..……….………………………. 1 Problems & issues company faced ……………………………… 3 Probable Solutions…………... … ………………………………. 4 Compnay Overview Tata Iron and Steel Company was established by Dorabji Tata on August 25, 1907, as part of his father Jamsetji's Tata Group.By 1939 it operated the largest steel plant in the British Empire. The company launched a major modernization and expansion program in 1951. Later in 1958, the program was upgraded to 2 Million metric tonnes per annum (MTPA) project.By 1970, the company employed around 40,000 people at Jamshedpur, with a further 20,000 in the neighbouring coal mines.In 1971 and 1979, there were unsuccessful attempts to nationalise the company.In 1990, it started expansion plan and established its subsidiary Tata Inc. in New York. The company changed its name from TISCO to Tata Steel in 2005. After then Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO)) constructed their headquartered in Mumbai, Maharashtra, Based in Jamshedpur India, and a subsidiary of the Tata Group. It was the 12th largest steel producing company in the world in 2012, with an annual crude steel capacity of 23.8 million tons, and the 2nd largest private-sector steel company in India (measured by domestic production) with an annual capacity of 9.7 million tons and the world’s 56th largest company. Post Corus merger, Tata Steel was India’s second-largest and...
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...House of Tata – Acquiring a Global Footprint Group 1 Bhuvan Bajaj Karan Bahl Raki Jain Trivikram Apte Vinayak Pareek Yan Yan Huang House of Tata – Acquiring a Global Footprint Executive Summary What and how did TATA emerge as a Multi Brand? Founded in 1868 by Jamshetji N. Tata as a trading firm Textiles in 1874 India’s first luxury hotel in 1903 First private steel company in 1907 First airline in 1932 First software firm in 1968 Liberalization of the Indian Economy and the changes that it brought to TATA’s way of doing business Ratan Tata becomes chairperson in 1991 • • First objective: Streamline group portfolio Some groups diversified and others organized around seven sectors 2 Major global expansions In 2000, Tata groups started internationalized operations and 65% of collective revenues were expected to come from outside India 1. Tata Consultancy ServicesWhy TCS, the group’s tech and consulting giant underwent its evolution at a much faster rate than the other Tata companies, in a sense became more global. And they perceived more growth in the foreign market and had to expand globally, TCS accounted for $27.8 billion of Tata’s $59.5 billion market capitalization as of August 2007 2. TitanExpanded globally but suffered high losses thus established itself as an NRI brand, especially in the Middle East. 3. Indian Hotels Company – TAJ Hotel Group Began globalization in 1982, Tata purchased 51 Buckingham gate and St. James court hotel which was later branded as...
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...Case Analysis – House of Tata: Acquiring a Global Footprint Explain what are any problems or challenges by four major Tata’s businesses; Tata hotel, Tata tea, Tata Steel, and Tata Motor, and justify the solutions for success in business management. Overall, those three Tata’s businesses have commonly objective to increase potential growth of marketing competitiveness, while to broaden management to be higher level of international-scale operation. To be sorted out by each department, Tata’s tea Due to being three times the size of Tata Tea, different economic scale of Tetley becomes a concern distracting firm manager overly focused on acquisition. This proposition corroborated according to the case is that “the senior management of Tetley was virtually unchanged after acquisition2” because the firm was trying to relieve complexity generated after acquisition. Thus, Tata’s tea could better restructure management temporarily from acquisition with supplemented Tetley’s tea to be leveraged buyouts due to managerial mistakes. Which is Tata tea management emphasized on product quality improvement in the long term by focusing on value-added, branded tea, and sales presence in advanced market rather than benefits of shareholders1. This can be noticed from the case that “Tata Tea limited its equity contribution to an amount that we could service on our own without any returns coming for a period of time even though not yet hurt Tata Tea shareholder2. This consequence...
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...Strategy Transnational Strategy Multi-domestic Strategy Global Integration High Low National Responsiveness High Low Quadrant 1 – Global Strategy, High requirement for integration and low awareness of differentiation. Based on price competition, entry strategy used it often mergers and acquisition. Quadrant 2 – International Strategy. Low requirement for centralised quality check and strategic decision making eliminating the need to adapt to individual countries. Mixed strategy combining low demand for integration and responsiveness. Quadrant 3 – Transnational Strategy. High requirement for integration and differentiation. Emphasizing both global integration and local responsiveness. Quadrant 4 – Multi-domestic Strategy. High requirement for differentiation but low concern for integration. Emphasize on local adaption. 2.1 ANALYSIS Adaption from the Case Studies and Research Cases Tata Group uses two different strategies locally and internationally when dealing with its businesses. Local businesses under Tata Group’ umbrella uses the Domestic Strategy which requires product differentiation base on the local adaption. Such example is the Tata Nano Car and the Tata Ace...
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...'Tata Steel', formerly known as TISCO (Tata Iron and Steel Company Limited), was the world's 56th largest and India's 2nd largest steel company with an annual crude steel capacity of 3.8 million tonnes. It is based in Jamshedpur, Jharkhand, India. It is part of the Tata Group of companies. Post Corus merger, Tata Steel is India's second-largest and second-most profitable company in private sector with consolidated revenues of Rs 1,32,110 crore and net profit of over Rs 12,350 crore during the year ended March 31, 2008. The company was also recognized as the world's best steel producer by World Steel Dynamics in 2005. The company is listed on BSEand NSE; and employs about 82,700 people (as of 2007). Corus was formed from the merger of Koninklijke Hoogovens N.V. with British Steel Plc on 6 October 1999. Corus is a leading European manufacturer providing steel and aluminium products and services worldwide. It focuses on semi-finished and finished carbon steel products. Corus is Europe’s second largest steel producer with revenues in 2005 of £9.2 billion (US$18 billion and crude steel production of 18.2 million tonnes, primarily in the UK and the Netherlands. Corus provides innovative solutions to the construction, automotive, packaging, mechanical engineering and other markets worldwide.. Group turnover for the year to 31 December 2005 was £10.142 billion. Profits were £580 million before tax and £451 million after tax. Company Backgrounds Tata Steel, formerly known as TISCO...
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