Tata Steel's Acquisition of Corus (B)

            
 
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : BSTR355 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Mergers and Acquisitions
Case Length : 17 Pages
Period : 1997-2009
Pub Date : 2009
Teaching Note : Not Available
Organization : Tata Steel Limited / Corus Plc.
Industry : Steel
Countries : UK, The Netherlands, India

Abstract:

The case examines the business and financial performance of Tata Steel Group (TSG) between February 2007 and October 2009 period after Tata Steel had acquired Corus Plc in January 2007. It discusses the impact of global economic slowdown on the global steel industry during the same period. The economic slowdown forced several leading steel producing companies including Corus to cut down their production to align supply with demand. However, Tata Steel (TSG's Indian operations) continued to perform well on the back of robust domestic demand and its low cost of production. Corus faced problems as it had to purchase its raw material requirements from outside. Iron ore and coaking coal prices went up significantly in 2007 and 2008 which increased the cost of production at Corus.

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Low demand for steel coupled with high and rising input costs led to TSG reporting consolidated losses of Rs 5.45 billion in the financial year 2008-09.

TSG took several measures to turn around Corus. It started acquiring iron ore and coal mines aggressively to secure the supply of raw materials at Corus. TSG implemented two strategic initiatives - Weathering the Storm and Fit for Future in its efforts to turn around its operations. However, in the first half of fiscal 2009-10 that ended in September 2009, TSG continued to report higher losses of Rs 49.58 billion. It remained to be seen whether the strategic initiatives undertaken by TSG would yield the desired results or not.

Issues:

Study and analyze the impact of global economic slowdown on the global steel industry.
Examine the rationale for the acquisition of Corus by Tata Steel.
Understand how Tata Steel went about realizing the synergies after the acquisition of Corus.
Study the factors that led to losses in TSG's operations.
Analyze the strategic measures taken by TSG to turn around its operations and evaluate the effectiveness of these measures.

Contents:

  Page No.
Tata Steel Group Reports Loss 1
The Acquisition 2
The Global Steel Industry 4
Realizing Synergies after the Acquisition 8
Impact of Global Slowdown 9
The Road Ahead 10
Exhibits 12

Keywords:

Tata Steel Group, Corus Plc., Restructuring Initiatives, Global Economic Slowdown, Economic Recession, Liquidity Management, Global Steel Industry, Global Credit Crisis, Sub-prime Crisis, ArcelorMittal, Merger Synergies, Weathering the Storm, Fit for Future, Global Steel Demand, Global Steel Output, Global Steel Prices

Tata Steel Group Reports Loss - Next Page>>

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