Tata Steel acquired Corus Group, then the world's fifth largest steel maker, in a $12 billion deal in 2007. This made Tata Steel the fifth largest steel producer globally. The acquisition was financed through a combination of equity and debt financing. It helped Tata Steel gain access to Corus' production lines, technology and global markets. However, Tata Steel's stock price saw volatility following the deal due to challenges in integrating the companies. The acquisition was regulated under Indian and international laws governing mergers and acquisitions.

1. TATA CORUS DEAL
By Rasieek Jain

2. TATA STEEL HISTORY
 Name:- Tata Steel
 Type:- Public Ltd.
 Industry:- Steel
 Founder(s):- Dorabji Tata
 Founded:- 1907
 Headquarters:- Mumbai
 Chairman:- Mr. Cyrus Pallonji Mistry
 Parent:- Tata Group
 Subsidiaries:- Nat Steel, Tata Steel Europe,Tata
Steel Thailand.
 NSE:- TATASTEEL, BSE: 500470

3. CORUS HISTORY
 Founded:- 1999
 Formation:- Merger of British steel corp. &
koninklijke N.V.
 Type:- Subsidiary
 Industry :- Steel
 Parent:- Tata steel,Tata Group.

4. SWOT ANALYSIS TATA STEEL
Low cost of production Quality of steel was not as
per International Standard
Easy access to raw material
Lack of R & D
Low Debt-Equity ratio
Lack of Technology
Brand TATA
SWOT
ANALYSIS
World Leader in steel by
having Competitive Competition from World
advantage in cost & High Leaders
quality steel

5. Introduction Of Corus
 London based Corus group is the worlds one of the largest
producer of steel & aluminum.
 Corus was formed in 1999 following the merger of Dutch
group koninclijike Hoogovens N.V. with UK’s British Steel Plc.
On October 6,1999 .
 It employees 47300 people worldwide & 24000 people in
UK.
 It had revenue of £9.2 billion in the year 2005,i.e.Rs.
64,400 CR.
 Corus provide Innovative solutions in construction ,automotive
packaging, mechanical engineering worldwide.

6. SWOT ANALYSIS OF CORUS
Worlds ninth largest &
Europe's second largest Lack of access to Raw
company Material
Wide range of products of High Operational Cost
high technology
SWOT ANALYSIS
To get access to raw material
through Merger Increase in losses result in
To decrease the Overlapping winding up of company
Cost of Value chain

7. Timelines Of Deal
 On October 20, 2006, Tata Steel announced that it had agreed to
pick up a 100% stake in the Anglo-Dutch steel maker Corus at 455
pence per share in an all cash deal, cumulatively valued at GBP 4.3
billion (USD 8.04 billion).
 On November 19, 2006, the Brazilian steel company CSN launched
a counter offer for Corus at 475 pence per share, valuing it at $8.4
billion.
 On December 11, 2006, Tata preemptively upped the offer to 500
pence, which was within hours trumped by CSN's offer of 515 pence
per share, valuing the deal at $ 9.6 Billion. The Corus board
promptly recommended both the revised offers to its shareholders.

8. ……
 On December 11, 2006, CSN announced a formal offer for
the Company at an offer price of 515 pence per Corus
Share, valuing the deal at $ 9.6 Billion
 on December 19, 2006, UK Watchdog the Panel on Takeovers
and Mergers announced that the last date for each of Tata
and CSN to announce revised offers for the Company, should
they wish to do so, is 30 January 2007. They also warned that
it would begin an auction procedure if the two remained in
competition.
 On January 31, 2007 Tata Steel won their bid for Corus after
offering 608 pence per share, valuing Corus at $11.3bn

9. How The Deal Financed
 Total TATA-CORUS deal of US $ 13.7 billion
 Equity Component-US$ 7.56 billion using Rights
issue,Preferencial issue along with other financial methods.
 Debt Component-US $ 6.14 billion through mezzanine & long
term loan arrengement with Citi Group,Standard
Chartered,ABN AMRO bank.
 For immmediate financing Tata Steek UK raised 2.66 billion
bridge loans.
 Acquisition was completed through Tata Steels UK Special
Purpose Vehicle named Tata Steel UK.

10. Deal
TATA STEEL LTD(INDIA)
TATA STEEL ASIA HOLDINGS(SINGAPORE)
TULIP UK HOLDINGS
TATA STEEL UK LIMITED(U K)
CORUS GROUP Plc

11. Why Did TATA STEEL Bid For Corus
 There is recognition that for indian economy to continue its
growth, its companies must look to compete on a global
scale.
 Globally Tata steel was only 56 th largest steel producer.
 Buying Corus will leapfrogs it to fifth largest steel producer
in world.
 Acquisition of Corus provide Tata steel of its production line
& technology.
 Economies of scale
 To tap europeon market.
 Corus hold No. of patents & R & D facilities.
 Cost of acquisition is lower than setting up green field
project & marketing & distribution channel

12. Why Corus Accepted The Deal
 The main reason is backward integration.
 Saturated market of europe.
 Decline in market share & profit.
 Lower net profit to sales ratio i.e.Revenue US$18.06 billion
& N.P.only $626 million.
 Employee cost of Corus was 15% & Tata only 9%.
 Loan of Corus was £ 1.6 billion.

13. Why Cash Deal
 A really confident acquirer will tend to pay for the acquisition
by cash and the markets historically have been rewarding this
confidence by responding through rise in share value, a stock
buy out could (almost certainly) take the opposite direction if
they sense that the stock is overvalued. In about 75% of the
cases, the stock value of acquirer has taken a dip soon after
the deal is announced. The cash buyout also makes sure that its
shareholders do not give up any merger gains to the acquired
companies shareholders.
 Immediate takeover was required
 Share swap deal would have been less attarctive to Corus
Shareholder.

14. ……
 Share swap deal may diluted the TataSteels share base which
was not in favor of Tata Steels share holder.
 Cost of acquisition Debt i.e.8% was less than cost of equity
i.e.15%.
 Share swap deal means FDI & lot of regularity which might
have not been accepted by Corus Shareholders.

15. What Happened After Deal
 There were a lot of apparent synergies between Tata Steel
which was a low cost steel producer in fast developing region
of the world and Corus which was a high value product
manufacturer in the region of the world demanding value
products. Some of the prominent synergies that could arise
from the deal were as follows :
 Tata was one of the lowest cost steel producers in the world
and had self sufficiency in raw material. Corus was fighting to
keep its productions costs under control and was on the look
out for sources of iron ore.
 Tata had a strong retail and distribution network in India and
SE Asia. This would give the European manufacturer an in-road
into the emerging Asian markets.

16. ……
 Powerful combination of high quality developed and low cost
high growth markets
 There would be technology transfer and cross-fertilization of
R&D capabilities between the two companies that specialized
in different areas of the value chain
 There was a strong culture fit between the two organizations
both of which highly emphasized on continuous improvement
and ethics. Tata steel's Continuous Improvement Program
‘Aspire’with the core values :Trusteeship,integrity,respect for
individual, credibility and excellence. Corus's Continuous
Improvement Program ‘The Corus Way’ with the core values :
code of ethics, integrity, creating value in steel, customer
focus, selective growth and respect for our people.

17. Tata Steel Revenue & share Price
Volatility after Deal

18. The Following Laws Regulating The
Mergers and Acquisitions in India:
Companies Act 1956
 Section 391 to 394 contains major provisions for mergers and
acquisitions. The provisions also deal with the compromise or
arrangement with or without merger. Presently High court
enjoys the power of sanctioning amalgamation matters under
sec. 394.. The following procedure shall be followed
 i. Examine the MOA of the company. The object clause
should permit to regulate, if not so provided in the clause
amend accordingly.
 ii. Convey board meeting to approve and draft the scheme
of amalgamation and for authorization of filing application to
the High court.

19. ……
. File application to High court to issue directions to convey the
general meeting.
 iv. The High court pass the necessary directions which shall
include time and place of the meeting, chairman of the
meeting, procedure to be followed in the meeting and time to
submit the report of the meeting to the court.
 v. Send notices to shareholders and creditors, Stock
Exchanges and also advertise the notice of the meeting in the
two daily news paper one in English and other in the regional
language.
vi. Hold the general meeting as per court’s direction. The
scheme shall be approved by 3/4th majority.

20. ……
 vii. File the report of the meeting to the court and stock
exchanges within 7 days.
 viii. File resolution with the ROC.
 ix. File petition to the court for sanctioning of the scheme.
 x. Within 30 days of sanctioning the scheme file courts
order with ROC.

21. Income Tax Act 1961 Provisions
 Section 2 (IB): Amalgamation means merger of either one or
more companies with another company or merger of two or
more companies to form one company in such a manner that:
 i. All the properties and liabilities of the transferor
company/companies become the properties and liabilities of
Transferee Company.
 ii. Shareholders holding not less than 75% of the value
of shares in the transferor company (other than shares which
are held by, or by a nominee for, the transferee company or its
subsidiaries) become shareholders of the transferee company.
 Section 47 (vi): Any transfer, in a scheme of amalgamation, of
a capital asset by the amalgamating company to the
amalgamated company if the amalgamated company is an
Indian company is not regarded as transfer and not
chargeable to tax.

22. ……
 Section 47 (vii): The transfer of shares by the shareholders of the
transferor company in lieu of shares of the transferee company on
merger is not regarded as transfer and hence gains arising from the
same are not chargeable to tax in the hands of the shareholders of the
transferee company.
 Section 49 (2): In case of merger, cost of acquisition of shares of the
transferee company, which were acquired in pursuant to merger will be
the cost incurred for acquiring the shares of the transferor company.
 Section 72A: Government can allow carry forward of losses and
unabsorbed depreciation provided the amalgamated company carry
on the business of the amalgamating company for at least 5 years.
 No Sales tax on mergers and amalgamation.

23. Sebi Act, 1992 Regulations
 The objective of the Takeover code is to regulate in an
organized manner the substantial acquisition of shares and take
over of a company whose shares are quoted on a stock
exchange
 Regulations regarding limits according to which shares shall be
acquired:
 The regulation for the minimum amount of shares to be
acquired and a public announcement to be made in
accordance with it are given under regulations 10, 11 and 12.

24. ……
 a)Regulation 10- According to this regulation, no person either
alone or with someone acting with the same intention shall
acquire shares in a company that would enable the person or
persons to practice more than 15% voting rights. The
regulations further say that, this could only be done by a
person who has made public announcement to acquire such
shares in accordance with the regulations. In other words a
person by himself or with a person acting with the same
intention shall make a public offer to acquire a minimum of
20% of shares in accordance with the regulation.
 b)Regulation 11- This regulation talks about an Acquisition by
a person or two or more persons acting together with common
intention, who have already acquired 15% or more but less
than 55% of share or voting rights, which would enable them

25. ……
 to exercise further 5% but not more voting rights in the same
financial year ending on 31st March. Though this can be done
if the acquirer makes a public offer to acquire such shares in
accordance with the regulations. The regulation further talks
about acquirers who already have 55% or more shares but
less than 75% shares of the target company but intend to
acquire more shares, this can only be done if the acquirer
makes a public announcement in this regard
 c)Regulation 12- The regulations further say that, any control
over the company shall not go into the hands of the acquirer
irrespective of whether acquisition of shares or voting rights
has taken place or not, until a public announcement to acquire
such shares has been made in accordance with the regulations.

26. Fema Act,1999 Provisions
 Foreign Exchange Management Act 1999
 FEMA is regulating the cross border mergers and acquisitions.
The foreign exchange laws relating to issuance and allotment
of shares to foreign entities are contained in The Foreign
Exchange Management (Transfer or Issue of Security by a
person residing outside India) Regulation, 2000 issued by RBI
vides Notification No. FEMA 20 /2000-RB dated 3rd
May, 2000. These regulations contained general provisions for
inbound and outbound cross border mergers and acquisitions in
India.. Under these provisions once the scheme of merger or
amalgamation of two or more Indian companies has been
approved by a court in India, the transferee company or new

27. ……
 company is allowed to issue share to the shareholders of
the transferor company resident outside India subject to
the condition that:
 i. The percentage of shareholding of person’s resident
outside India in the transferee or new company does not
exceed the sectoral cap.
 ii. The transferor company or the transferee or the new
company is not engaged in activities, which are prohibited
in terms of FDI policy.

28. Major Acquisitions

29. Global Steel Ranking

30. CONCLUSION
 On July 23, 2007, Tata Steel stock reached a 52-week high close of
721.00 on the Bombay Stock Exchange’s (BSE) 30-stock Sensex
after hitting a low of 399.00 on March 8, 2007.
 Tata Steel was one of the market leaders for the BSE Sensex up
27% in 2007.
 Standard & Poor’s Ratings Services cut its credit rating to BB from
BBB and removed them from the negative watch list on which they
were placed after the financing structure for the acquisition of Corus
was announced.
 The rating was changed to a positive outlook.
 If after acquisition,if this deal will able to acquire all the
synergies,then TATA STEEL-CORUS can be within top 3 companies by
the year 2015.

31. References
 www.bbc.co.uk
 Wikipedia
 Business Standard
 www.corusgroup.com
 www.thehindubusinessline.com

32. THANK YOU
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