Tata Steel's Acquisition of Corus (B)


Tata Steel's Acquisition of Corus (B)
Case Code: BSTR355
Case Length: 17 Pages
Period: 1997-2009
Pub Date: 2009
Teaching Note: Not Available
 Price: Rs.300
Organization: Tata Steel Limited, Corus Plc.
Industry: Steel
Countries: UK, The Netherlands, India
Themes: Mergers and Acquisitions
Tata Steel's Acquisition of Corus (B)
Abstract Case Intro 1 Case Intro 2 Excerpts

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.

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

The case is structured to achieve the following teaching objectives

  • 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

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

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