Tata Steel's Acquisition of Corus

            
 
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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 : FINC049 For delivery in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Financing Acquisition
Case Length : 27 Pages
Period : 2006-2007
Pub. Date : 2008
Teaching Note : Available
Organization : Tata Steel Limited, Corus Group Plc
Industry : Iron & Steel
Countries : India, Netherlands

Abstract:

On January 31, 2007, Tata Steel Limited (Tata Steel), one of the leading steel producers in India, acquired the Anglo Dutch steel producer Corus Group Plc (Corus) for US$ 12.11 billion (€ 8.5 billion). The process of acquisition concluded only after nine rounds of bidding against the other bidder for Corus - the Brazil based Companhia Siderurgica Nacional (CSN).

This acquisition was the biggest overseas acquisition by an Indian company. Tata Steel emerged as the fifth largest steel producer in the world after the acquisition. The acquisition gave Tata Steel access to Corus' strong distribution network in Europe.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Corus' expertise in making the grades of steel used in automobiles and in aerospace could be used to boost Tata Steel's supplies to the Indian automobile market. Corus in turn was expected to benefit from Tata Steel's expertise in low cost manufacturing of steel. However, some financial experts claimed that the price paid by Tata Steel (608 pence per share of Corus) for the acquisition was too high.

Corus had been facing tough times and had reported a substantial decline in profit after tax in the year 2006. Analysts asked whether the deal would really bring any substantial benefits to Tata Steel. Moreover, since the acquisition was done through an all cash deal, analysts said that the acquisition would be a financial burden for Tata Steel.

Issues:

Gain an in-depth knowledge about various corporate valuation techniques.

Critically examine the rationale behind the acquisition of Corus by Tata Steel.

Understand the advantages and disadvantages of cross-border acquisitions.

Understand the need for growth through acquisitions in foreign countries.

Study the regulations governing mergers & acquisitions in the case of a cross-border acquisition.

Get insights into the consolidation trends in the Indian and global steel industries.

Contents:

  Page No.
Introduction 1
Background Note 2
Tata Steel Vs CSN: The Bidding War 4
Financing the Acquisition 5
The Integration Efforts 7
The Synergies 8
The Pitfalls 9
The Road Ahead 10
Exhibits 12

Keywords:

Tata Steel, Corus, Companhia Siderurgica Nacional, Mergers and Acquisitions, Global consolidation, Special Purpose Vehicle, All cash deal, Share Swap, Integration, Synergies, Takeover Regulations, EBITDA

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