British Steel - Dutch Royal Hoogovens Merger: An Anglo-Dutch Marriage not Working Out?

            
 
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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 : BSTR144 Electronic Format: Rs. 500;
Courier (within India):Rs. 25 Extra
Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies

Themes

Cross-border Mergers & Aquisitions
Case Length : 20 Pages
Period : 1999-2004
Organization : British Steel
Pub Date : 2005
Teaching Note : Available
Countries : UK, Netherlands
Industry : Steel

Abstract:

The case discusses in detail the various drivers that led to the merger of British Steel and Hoogovens to form a new company, Corus. It provides relevant information about the European steel industry in general and the UK steel industry in particular during the period, both before and after the merger. Corus was an attempt to revive the ailing British Steel which had incurred a net loss of 81 million in the year ended 31 March 1999. Analysts pointed out that the high valuation of the British pound and stagnation in demand for steel was gradually undermining the competitiveness of British Steel in the European market. The larger merged company was expected to meet the challenges of the increasing bargaining power of customers and the downward movement of steel prices.


The Dutch partner Hoogovens sought to gain critical mass in the global metals market through synergies with its UK partner. But Corus failed to live upto market expectations. Just three years after the merger, in 2003, Corus's stock market valuation had dropped to $230 million from $6 billion in 1999. Various reasons were identified for the failure, chief among them being the cultural mismatch between the merged entities and the lack of HR involvement when integrating the two entities. Large scale labour unrest due to the downsizing and rationalization of various operations seriously impacted the normal functioning of the new organization.

Issues:

Understand and appreciate the various drivers that affect the global steel industry

Evaluate the market and economic implication of mergers and identify the synergies that can be attained

Understand issues involved in cross border mergers: rationalization of the workforce and operations, restructuring the organization structure and integration of the cultural differences between the merged entities

Discuss in detail the parameters that led to the merger of British Steel and Hoogovens and the scope and potential of the new entity

Trace the reasons behind the failure of Corus to meet management and market expectations

Appreciate the role of coordination in cross-cultural mergers and discuss how unstructured HR activities could jeopardize other operations

Contents:

  Page No.
Introduction 1
The European Steel Industry 2
Rationale Behind the British Steel-Hoogovens Merger 3
The Organizational Structure 5
Problems Galore 6
What Analysts Had To Say 11
Exhibits 12

Keywords:

British Steel, Dutch Royal Hoogovens, Corus Group Plc., The European Steel Industry, Cross Country Mergers, Cultural Mismatch, Anglo-Saxon Style of Management, Trade Unions, Dutch Trade Union Federation, The UK Steel Industry, Synergies, Global Steel Supply-Demand, World Steel Prices, HR Issues in Cross-Border Mergers and Synergies From Mergers.

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