Tata Corus acquisition

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Merger & Acquisition

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  • Despite skepticism of the merger, Tata Steel stock price went up from Rupees 399 to 799 and
  • Tata Steel Europe stock price has gone up from 608 pence ie 6 pounds and 8 pence, the price of acquiring Corus, to over 15 pounds.
  • Tata Corus acquisition

    1. 1. Tata-Corus AcquisitionGroup2Sameep Kunja (2011SMN6501)Anita Singh (2011SMN6504)Leena Sadhu (2011SMN6538)Piyush Bajpayee (2011SMN6539)Souptik Sarkar (2010CEC3850) Course : SML730 DMS, IIT Delhi Organisation Management
    2. 2. Overview of the Acquirer1 Former Name : Tata Iron and Steel Company2 Founded : 19073 Founder : Jamshedji Tata4 Headquarter : Jamshedpur, Jharkhand, India5 Chairman : Ratan Tata6 Type : Public BSE (500470)7 Industry : Steel8 Parent : Tata Group Course : SML730 DMS. IIT Delhi Organisation Management
    3. 3. Overview of the Acquired1 Name : Corus2 Founded : 19993 Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V.4 Headquarter : London, England, UK5 CEO : Kirby Adams6 Type : Subsidiary7 Industry : Steel8 Parent : Tata Steel, member of Tata Group Course : SML730 DMS. IIT Delhi Organisation Management
    4. 4. Reasons for AcquisitionCourse : SML730 DMS, IIT DelhiOrganisation Management
    5. 5. Reasons for Bid from Tata Steel • To tap European mature market • Cost of acquisition is lower than setting up green field plant and marketing and distribution channel. • Tata manufactures low value long and fast steel products while Corus produced high value stripped products
    6. 6. Reasons for Bid from Tata Steel • Acquisition would help Tata to feature in top 10 players in the world. • Technology benefit • Economies of scale • Corus held a number of patents and R&D facilities
    7. 7. Reasons From Corus to accept theTata Bid • Saturated market of Europe • To extend its global reach through Tata • To get access to low cost Indian Ore reserves • Decline in market share and profit • Total debt of Corus was 1.6 Bn GBP • Facilities were old with high cost of production
    8. 8. How the Acquisition was ImplementedCourse : SML730 DMS, IIT DelhiOrganisation Management
    9. 9. The Tata-Corus DealStatistics • Tata acquired Corus on 2nd April 2007 • The deal price was US $ 12.11 Billion • 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
    10. 10. The Tata-Corus DealInvestment Vehicle • A holding company was setup by Tata in Singapore to acquire Corus. • Idea was to have all foreign acquisitions under one holding company. • Singapore has a favorable Tax jurisdiction and gave Tata Steel an easy avenue for raising global resources and funds
    11. 11. The Tata-Corus Deal Corus Group Ltd. (UK) Tata Steel UK (SPV) Tata Steel Holdings Asia (Singapore) Tata Steel India
    12. 12. The Tata-Corus DealProcess of Acquisition • Appointing Advisors • Negotiating Terms • Due Diligence • Exchange of contracts • Completion
    13. 13. Ratan Tata – Chairman of Tata Steel on Acquisition “This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion. Corus and Tata Steel are companies with long, proud histories. We have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread. Together we will be even better equipped to remain at the leading edge of the fast changing steel industry.”
    14. 14. Was The Merger a Success or a Failure?Course : SML730 DMS, IIT DelhiOrganisation Management
    15. 15. Merger – Success or Failure?The following points can be attributed:• TATA Steel Group rose to 5th position from 56th• The production capacity increased from 4million tonnes to 28million tonnes by 2011• Standard & Poor’s Rating cut it credit Rating to BB from BBB and removed them from the negative watch list
    16. 16. Union Problems at Redcar’s Teeside Plant• The 150 year old Redcar plant was to be mothballed costing 1700 jobs – May 2009• The deal led by Italian steel specialist Marcegaglia had fallen; which promised to buy around 78% of Redcar’s production• The reason attributed to this is unprecedented fall in demand due to recession in Steel industry
    17. 17. Reasons for Success or Failure?Course : SML730 DMS, IIT DelhiOrganisation Management
    18. 18. Success - Corus’ Diversified Presence• Aerospace • The 2nd largest• Automotive Company of Britain• Construction and one of the• Consumer Products flagship companies of the Britain’s• Defense & Security infrastructure• Energy & Power industry• Lifting & Excavation• Packaging• Rail
    19. 19. Success - Corus’ R&D Unit• Strong Research & Development Unit• Several Patent’s to its credit• Produces high end steel• Large Customer base
    20. 20. TATA’s Implementation of the Deal• Big boost to the Indian economy, as TATA was acquiring a company 3 times its size• The R&D Unit of Corus complements that of TATA’s• Links low cost Indian production and raw materials and growth markets to high margin markets and high technology in the West• Help from financing institutions as $8 billion was raised through debt
    21. 21. Statistics• Tata Steel Stock Price
    22. 22. Statistics• Tata Steel Europe Stock Price
    23. 23. Statistics• Net debt fell from $10.43 billion in June, 2010 to $9.13 billion in March, 2011• Tata Steel Group recorded profit after tax of Rs5,347 crores in Q1 FY’12, almost three times the profit of Rs1,825 crores recorded in Q1 FY’11
    24. 24. Verdict Acquisition - A SUCCESS
    25. 25. THANK YOU!

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