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.
Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence(rs 484), which is 33.6% higher than the first offer which was 455 pence.
Acquisition Process Particulars Corus Currency: Rupee Millions TATA Steel Ltd Currency: Rupee Millions Year 2006 2005 2004 2006 2005 2004 ASSETS 582750.00 533925.00 467775.00 205,450.70 177,033.10 147,988.70 DEBTS 98100.00 105525.00 96000.00 45,932.70 42,073.10 39,982.90 LIABILITIES 231300.00 178425.00 155475.00 30492.10 33146.80 32665.90 REVENUE 760500.00 699900.00 596475.00 202,444.30 159,986.10 111,294.40 NET INCOME 33900.00 33450.00 -22875.00 37,346.20 36,032.60 17,887.80
Process of Acquisition
Finding A Target Business
Exchange of Contracts
Finding A Target Business
Synergy of Operations
Help the Organizations to Achieve Strategic Objectives
Enter new markets
The Right Chemistry
The Right Experience
Size is not Everything
Talk Your Language
CORUS TATA J P MORGAN ABN AMRO CAZENOVE DEUTSCHE BANK HSBC STANDARD CHARTERED
The nature of the fit
Commonality of client base
Sharing of resources
Negotiation By Tata
September 20, 2006 : Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer
October 5, 2006 : The Indian steel giant, Tata Steel wants to fulfill its ambition to Expand its business further.
October 6, 2006 : The initial offer from Tata Steel is considered to be too low both by Corus and analysts.
October 17, 2006 : Tata Steel has kept its offer to 455p per share.
October 18, 2006 : Tata still doesn’t react to Corus and its bid price remains the same.
October 20, 2006 : Corus accepts terms of £ 4.3 billion takeover bid from Tata Steel
October 23, 2006 : The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steel’s bid.
October 27, 2006 : Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata.
November 3, 2006 : The Russian steel giant Severstal announces officially that it will not make a bid for Corus
November 18, 2006 : The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475p per share
December 18, 2006 : Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazil's CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel's
January 31, 2007 : Britain's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash
April 2, 2007 : Tata Steel manages to win the acquisition to CSN and has the full voting support from Corus’ shareholders
Taxation and Accountancy Considerations
Tension between Acquisition / sale of shares or assets.
Accounting policies of the Target
Accounting for Goodwill
Fair value accounting
Earnings per share
Share sale Agreement
The shares being sold
Conditions to the Deal
Transferring tangible assets
Transferring Intangible assets
The Tax Deed
The Disclosure Letter
Financing the Deal
TATA- CORUS Deal - $12 billion
Equity Contribution from Tata Steel- $3.88 billion
Credit Suisse leaded, joined by ABN AMRO and Deutsche Bank in the consortium.
Of the $ 8.12 billion of financing , Credit Suisse provided 45% and ABN AMRO and Deutsche provided 27.5% each.
WHY CASH DEAL?
Tata Steel's security credit rating was investment grade whereas Tata Steel UK had a lower security credit rating.
'share swap' deal less attractive to the Corus shareholders.
'share swap' would have diluted Tata Steel's equity base.
DEVELOPING A POST-ACQUISITION STRATEGY:
The first 100 days
In-house systems synergy
First 100 Days: Conflict Points
Leadership style differences
Who’s in charge? (Who won?)
Organic vs. bureaucratic cultures
Open vs. closed communication
Decision making speed & style
Structures that don’t match
In-house systems synergy Operational Excellence (low cost producer) Product Leadership (best product) Customer Intimacy (best total solution)
Strategy: Disciplines, Priorities
Error free, reliable
Fast (on demand)
Consistent information for all
'Once and Done'
New products or services
Meet volatile customer needs
Never satisfied - obsolete own and competitors' products
Easy to do business with
Have it your way (customization)
Market segments of one
Relationship and consultative selling
Culture M&A Strategy Resources Business Objective Structure Leadership Person
Global Steel Ranking: (Ranking of Tata steel before deal- 55) Company Capacity (in million tonnes) Arcelor - Mittal 110.0 Nippon Steel 32.0 Posco 30.5 JEF Steel 30.0 Tata Steel - Corus 27.7 Bao Steel China 23.0 US Steel 19.0 Nucor 18.5 Riva 17.5 Thyssen Krupp 16.5
Rationale of the Corus deal
augmented its crude steel capacity to 27 mtpa
the combined entity forms the 6th largest Steel company
The merged entity has brought Tata Steel to the world platform
Provided Tata Steel access to new markets and presence across the steel value chain
Much broader distribution network
With Corus in its fold, Tata Steel can confidently target becoming one of the top-3 steel makers globally by 2015. The company would have an aggregate capacity of close to 56 million tones per annum, if all the planned Greenfield capacities go on stream by then.
We can conclude that if the acquisitions well planned , Executed and the necessary precautions taken for the deal a company can achieve its strategic objectives and thus ensure its growth through Acquisition.