Tata Steel's Acquisition of Corus
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Case Details:
Case Code : FINC049
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
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FINC049) click on the button below, and select the case from the list of available cases:
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Please note:
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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Excerpts Contd...
The Synergies
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Most experts were of the opinion that the acquisition did make strategic sense for Tata Steel. After successfully acquiring Corus, Tata Steel became the fifth largest producer of steel in the world, up from fifty-sixth position.
There were many likely synergies between Tata Steel, the lowest-cost producer of steel in the world, and Corus, a large player with a significant presence in value-added steel segment and a strong distribution network in Europe. Among the benefits to Tata Steel was the fact that it would be able to supply semi-finished steel to Corus for finishing at its plants, which were located closer to the high-value markets...
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The Pitfalls
Though the potential benefits of the Corus deal were widely appreciated, some analysts had doubts about the outcome and effects on Tata Steel's performance. They pointed out that Corus' EBITDA (earnings before interest, tax, depreciation and amortization) at 8 percent was much lower than that of Tata Steel which was at 30 percent in the financial year 2006-07...
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The Road Ahead
Before the acquisition, the major market for Tata Steel was India. The Indian market accounted for sixty nine percent of the company's total sales.
Almost half of Corus' production of steel was sold in Europe (excluding UK). The UK consumed twenty nine percent of its production.
After the acquisition, the European market (including UK) would consume 59 percent of the merged entity's total production (Refer Table III for the spread of Tata-Corus markets before and after the acquisition)... |
Exhibits
Exhibit I: Top Ten Players in the Global Steel Industry
Exhibit II: Tata Steel - Consolidated Income Statement (2003-07)
Exhibit III: Tata Steel - Consolidated Balance Sheet (2003-07)
Exhibit IV: Corus - Consolidated Income Statement (2004-06)
Exhibit V: Corus - Consolidated Balance Sheet
Exhibit VI: Takeover Regulations in the UK
Exhibit VII: Auction Rules that Governed the Acquisition of Corus
Exhibit VIII: Corus - Stock Price Chart (September 2002 - March 2007)
Exhibit IX: Tata Steel - Stock Price Chart (September 2002 - June 2007)
Exhibit X: Fitch Ratings
Exhibit XI: Tata-Corus - Profile
Exhibit XII: Tata Corus - Consolidated Financial Performance
Exhibit XIII: A Note on EV, EBITDA and EV/EBITDA
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