Merger & acquisition


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Merger & acquisition

  1. 1. Tata- CorusP&G-Gillete
  2. 2.  Sep 20, 06 : CORUS uses the strategy to work with low cost producer. Oct 06, 06 : Initial offer by TATA is considered to be too low. Oct 17, 06: TATA kept its offer to 455 pence per share. Oct 20, 06 : CORUS accepts the offer of £4.3 billion. Oct 23, 06 : Brazilian Steel Group CSN counter-offer to TATA’s offer. Oct 27, 06 : CORUS criticized by JCB for acceptance of TATA’s offer. Nov 18, 06 : The CSN approaches Corus With an offer of 475 pence per share Nov 27, 06 : Board of Corus decides to give more time for shareholders to decide whether it issue forward a formal offer. Dec h18,06 : Tata increases its original bid for Corus 500 pence per share, then CSN made its counter bid at 515 pence per share in cash Jan 31, 07 : Tata ad agreed to offer Corus investors 608 pence per share in cash Apr 02, 07 : Tata steel manages to win acquisition to CSN and has the full voting support from Corus shareholders
  3. 3.  TATA Acquired CORUS on 2nd April 2007 which is 4 times larger than its size. The deal price was $ 12 Billion. TATA Steel,the winner of the auction for CORUS declares a bid of 608 Pence per share. In 2005 when the deal was started the price per share was 455 pence. TATA Surpassed the final bid from Brazilian steel maker ‘COMPANHIA SIDERURGICA NACIONAL’ (CSN) of 603 pence per share. The combined entity has become the world’s fifth largest steelmaker after the deal. For this deal TATA has finance only 4 Billion $ from internal company resources. TATA Have secured funding commitments from its advisors. These advisors were Deutshe bank, ABN Amro and Standard Chartered.
  4. 4. FOR TATAThe initial motive behind the deal was not CORUS revenue size but rather its market value.To compete on global scale because then TATA was just at 56th rank in steel production.CORUS holds a number of Patents and R & D facility. Acquiring Corus will give Tata access to European customers of steel.Acquisition cost will be lower then setting up new green field plants and marketing channel.
  5. 5. 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.Total Debt of Corus was GBP 1.6bnSaturated market of Europe.Better facilities and lower cost of productionEmployee cost was 15 % (TATA- 9%)Profit margin was 3.4% (TATA- 17%)
  6. 6. ..
  7. 7.  Biggest merger in the history of Consumer goods P&G acquired Gillette for $57b to become the world’s largest consumer goods company Annual Sales of the combined entity:$60.7b After purchase of Gillette P&G will have $21b brands with market cap of $200b P&G paid .975$/share(20% premium),later buyback of shares worth $18-22b over 12-18 months
  8. 8.  Merging companies: similarity in Corporate history Merger based on a different model where innovation was the focus rather than the scale Regulatory concerns: Product overlaps Consumer goods after 1980s
  9. 9.  P&G strength: Women’s personal care products Gillette strength: Men’s grooming category Complementary in strength cultures and vision to create potential for superior sustainable growth Gillette stock climbed 50% since 2003,profits jumped on premium products Acquisition added about 20% to P&G sales, long term sales growth estimate to 5-7% a year Operating margin expected to grow by 25 % by 2015 from 19% in 2003 The companies expected cost savings of $14-16 bn from combining back-room operations and new growth opportunities.
  10. 10.  more resources to enable intensive collaborative supply chain initiatives in a more cost-effective way. merger would also bring down the advertising and media costs owing to greater bargaining power Opportunities in developing markets: Gillette would give exposure to P&G in emerging economies like India and Brazil, while P&G would distribute Gillette products in China It will give P&G the much needed boost to further strengthen its product categories where at present it has negligible presence The deal will help Gillette in improving its inventory days.
  11. 11.  The merger would result in around 6,000 job cuts, equivalent to 4% of the two companies combined workforce of 140,000. Most of the downsizing will take place to eliminate management overlaps and consolidation of business support functions. Cultural problems absence because of geographical proximity P&G is considered a promote-from-within company, and already had a lot of executive talent at the top. Therefore, absorbing Gillettes management to their satisfaction could be difficult P&Gs ability to handle this massive cultural assimilation would decide the success or failure of this acquisition. Overlaps of some brands