Tata Steel's Acquisition of Corus
| Case Code: FINC049 Case Length: 27 Pages Period: 2006-2007 Pub Date: 2008 Teaching Note: Available |
Price: Rs.500 Organization: Tata Steel Limited, Corus Group Plc Industry: Iron & Steel Countries: India, Netherlands Themes: Financing Acquisition |
Abstract Case Intro 1 Case Intro 2 Excerpts
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.
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
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Introduction
Background Note
Tata Steel Vs CSN: The Bidding War
Financing the Acquisition
The Integration Efforts
The Synergies
The Pitfalls
The Road Ahead
Exhibits
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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