SUBMITTED TO: PROF OBEROI

CREATED BY: AksharaKambli ShrikantSabat Sunil Yadav

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TABL OF CONTENT Sl. no 1 Content Int oduction TATA STEEL CORUS GROUP PLC. Prelude The De l Ti eline Fin nci l det il
REVENUE DETAIL FINANCIAL REPORT

Pg. no 3

2 3 4 5

5 6 7 9

Synergy between co p nies

12

Post- erger 7 8 An lysis

13

16

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INTRODUCTION
TATA STEEL
Tata Steel formerly known as TISCO and Tata Iron and Steel CompanyLimited, is the world's seventh largest steel company, with an annual crude steel capacity of 31 million tonnes. It is the largest private sector steel company in India in terms of domestic production. Currently ranked 410th on Fortune Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata Group of companies. Tata Steel is also India's second-largest and second-most profitable company in private sector with consolidated revenues of 132,110 crore (US$29.46 billion) and net profit of over 12,350 crore (US$2.75 billion) during the year ended March 31, 2008.Tata Steel is the 8th most valuable brand according to an annual survey conducted by Brand Finance and The Economic Times in 2010. Its main plant is located in Jamshedpur, Jharkhand, with its recent acquisitions, the company has become a multinational with operations in various countries. The Jamshedpur plant contains the DCS supplied by Honeywell.The registered office of Tata Steel is in Mumbai. The company was also recognized as the world's best steel producer by World Steel Dynamics in 2005.[11] The company is listed on Bombay Stock Exchange and National Stock Exchange of India, and employs about 82,700 people (as of 2007).

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C R
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PR
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THE EAL
There are not many opportunities for producers in emerging low-cost markets to gain access to the markets of Europe other than by acquiring a company like Corus, John Quigley (Editor, Industry Publication Steel week) "It is a two-way street now, not only India is seeking foreign investment, but Indian companies areemerging investors in other countries." Kamal Nath (commerce minister) The eal et een Tata & C as i iall announced on April nd, at a priceof pence per ordinary share in cash. This deal is a % acquisition and the newentity will e run y one of Tatas steel subsidiaries. As stated by Tata, the initial oti ebehind the completion of the deal was not Corus revenue si e, but rather its marketvalue. Even though Corus is larger in si e compared to Tata, the company was valuedless than Tata at approximately billion) at the time when the deal negotiations started. But from Corus point of view, as the management has stated that the basic reason forsupporting this deal were the expected synergies bet ween the two entities. Corus hassupported the Tata acquisition due to different motives. However, with the Tataacquisition Corus has gained a great and profitable opportunity to make an exit as thecompany has been looking out for a potential buyer for quite some time. The total value of this acquisition amounted to .2 billion 2 billion). pence per Tata teelthe winner of the auction for Corus declares a bid of share surpassed thefinal bid from Brazilian teel maker CompanhiaSiderurgicaNacional CSN) of pence per share. Prior to the beginning of the deal negotiations, both Tata Steel and Coruswere interested in entering into an M&A deal due to several reasons. The official pressrelease issued by both the company states that the combined entity w ill have a pro formacrude steel production of 27 million tonnes in 2007, with ,000 employees across fourcontinents and a joint presence in countries, which makes it a serious rival to othersteel giants.

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TIMELINE
September 20, 2006:Corus Steel has decided to acquire a strategic partnership ith aCompany that is a low cost producer October 5, 2006:The Indian steel giant, Tata Steel wants to fulfil its ambition toExpand its business further. October 6, 2006:The initial offer from Tata Steel is conside red to be too low bothby Corus and analysts. October 17, 2006:Tata Steel has kept its offer to p per share.

October 18, 2006:Tata still doesnt react to Corus and its bid price remains the Same October 20, 2006:Corus accepts terms of Steel October 23, 2006:The Brazilian Steel roup CSN recruits a leading investmentbank to offer advice on possible counter -offer to Tata Steels bid. October 27, 2006: Corus is criticized by the chairman of CB, Sir Anthony Bamford, for its decision to accept an offer from Tata. November 3, 2006:The Russian steel giant Severstal announces officially that it willnot make a bid for Corus November 18, 2006:The battle over Corus intensifies when Brazilian group CSNapproached the board of the company with a bid of 75p pershare November 27, 2006 : The board of Corus decides that it is in the best interest of its willshareholders to give more time to CSN to satisfy the preconditionsand decide whether it issue forward a formal offer December 18, 2006:Within hours of Tata Steel increasing its original bid for Corus to500 pence per share, Brazil s CSN made its formal counter bid forCorus at 515 pence per share in cash, 3% more than Tata Steel sOffer. .3 billion takeover bid from Tata

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January 31, 2007:Britain's Takeover Panel announces in an e-mailed statement thatafter an auction Tata Steel had agreed to offer Corus investors608 pence per share in cash April 2, 2007:Tata Steel manages to win the acquisition to CSN and has the full voting support form Corus shareholders

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Financial Details
REVENUE DETAIL

TATA STEEL REVENUE-2005

2% 1% 1% 4% INDIA ASIA 23% U.K

EUROPE 69% ROW

NORTH AMERICA

TOTAL REVENUE USD 5 BILLION

CORUS REVENUE-2005
3% 0% 7% 8%

INDIA ASIA
28%

U.K
EUROPE

54%

ROW NORTH AMERICA

TOTAL REVENUE USD 19.4 BILLION

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COMBINED REVENUE-2005
3% 7% 13%

INDIA 11% ASIA U.K

EUROPE

44%

ROW 22% NORTH A ERICA

COMBINED REVENUE USD 24.4 BILLION

Comparison bas d on fiqur s of 2007 -08

Capacity Revenues Profit

204

118 84.737 61.045

19.7

63.871
48.249

34 6.455
Nippon Steel

32 5.879 JFE Steel

31
8.78 Posco

28.7 9.702 Tata Steel-Corus

Arcelor ittal

Capa ity in million tonn s, R v nu and profits in Rs 000 ror s

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L REPORT ON DEAL

 Equity contribution of .1 billion from TATA STEEL and fully underwritten non-recourse debt package of 6.14 billion  Equity based on 46.7 million fully diluted shares of COR S  Transaction value based on B/S date of 31 st March 2007, with net debt of 2.672 billion  Expected Synergy of 350 million per year  The company expects to infuse equity of 4.1 billion dollar, the break of equity is as follows 1. USD 700 million from internal generation 2. USD 500 million of ECB 3. USD 640 million from issue of preferential shares to TATA sons in 2006-07 and 2007-08 4. USD 862 million from right issue to the equity shareholders 5. USD 1000 million from rights issue of convertible preference shares 6. USD 500 million from a foreign issue of equity related instrument  USD 2.66 billion, which will be put Asian subsidiaries will be mezzanine debt, which will be removed as when required  The remaining debt of close to USD 6 billion will be funded by three bank Standard Chartered, ABN AMRO and Deutsche bank to TATA STEEL UK limited, a subsidiary specifically formed for takeover

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Capital Stru tur

Synergies between the companies

 Tata was one of the lowest cost steel producers in the world and had selfsufficiency in raw material. Corus was fighting to keep its productions costs under control and was on the lookout for sources of iron ore.  Tata had a strong retail and distribution network in India and SE Asia. This would give the European manufacturer a in-road into the emerging Asian markets. Tata was a major supplier to the Indian auto industry and the demand for value added steel products was growing in this market. Hence there would be a powerful combination of high quality developed and low cost high growth markets  There would be technology transfer and cross-fertilization of R D capabilities between the two companies that specialized in different areas of the value chain  There was a strong culture fit between the two organizations both of which highly emphasized on continuous improvement and ethics. Tata steel's Continuous Improvement Program Aspire with the core values: Trusteeship, integrity, respect for individual, credibility and excellence. Corus's Continuous Improvement Program The Corus Way with the core values: code of ethics, integrity, creating value in steel, customer focus, selective growth and respect for our people.

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POST MERGER Ne Board Post-merger a new board was formed constituting people from both the companies the board was like this 1. MR Ratan Tata chairman 2. MR im Leng will be deputy chairman 3. MR B muthuraman, MR Ishaat Husain and Arun andhi will join this board from TATA Steel Effect on shares and credit rating The Indian market took this deal positively and the share prices rose from 372.30 on 2 April 2007 on NSE to 443.58 on 10 April 2007. But, the international was not so upbeat; Standards & Poors decreased its debt rating to BBB on its unsecured bank loan. Capacity Expansion After the acquisition of Corus Tata Steel is going for expansion in various part of the country, keeping in the mind the increasing demand within country, and if the plan goes well it will soon emerge as 2nd largest Steel producer of the world, and its Indian branch will become the most prominent branch in the group. It intends to open new plants in Chhattisgarh and Orissa and it intends to double the production in existing amshedpur plant from 5 million tonnes to 10 million tonnes. It also wants to have a second plant in harkhand and feasibility study is underway this plant will become the largest plant in India on completion. If things go well the overall capacity of Tata Steel will grow from current 28.7 million tonnes to 63 million tonnes.

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Tata teel Ori a, 6



Tata teel(Jharkhand)),


Futur Capa ity in million tonn s

Tata teel (Jam hedpur), 5



Curr nt Capa ity in million tonn s

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Nat teel ( ingap r e),

 

Millenium teel (Thailand), .7



Nat teel ( ingap re),

  

 

Millenium teel (Thailand), .7

 

Tata teel(Jam hedpur),

C ru ,



C ru ,

Main compe itors globally

COMPANY

CAPACITY (million tons)

ArcelorMittal

118

Nippon Steel

34

JFE Steel

32

Posco Steel

31

Bao Steel China

23

U.S Steel

19

Nucor Steel

18.5

Riva Steel

17.5

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Analysis
This deal is significant chapter in the history of Indian business and TATA group; it made TATA STEEL one of the leaders in its field and showcased the ever increasing might of the Indian businesses. This deal has given TATA a direct entry into the market of Europe and U.K and will mark the beginning of new era for Indian businesses on the global front. Its also important to note that Tata Steels have taken over a company 4 times its own size and dea l which will go down as one of the largest deals till the time. Though all agree that TATA group has an uphill task of converting volumes of Corus into actual profits and may have to downsize, which they did immediately after the takeover and the task beca me even tougher as soon after the takeover they were faced with first recession of the century in 2008, which pushed the demand further down, but since then the group has managed the resources well. It is still to be seen whether the ambition of TATA group to become a global leader will be successful or not, but they are making clear to the world and once again are showing path to Indian business houses, this message again became clearer when they took over the likes AGUAR and LAND ROVER. Talking in technical terms this merger has made Tata Steel the 5 th largest group in terms of total capacity. In terms of revenue and profits it is ranked 3rd and 2nd respectively and as we all know the Tatas are known for producing the best low cost Steel in the world the profits are going to improve further. Strategically this merger has given the Tatas a bigger market to explore and direct entry into the European and U.K markets. This merger also marks greater competition in the form of global giants like ArcelorMittal Nippon Steel etc. These giants with greater resources and greater experience will prove to be good challenge and motivation for Tatas global ambiti on, but who knows with future expansion planned we very well be seeing it growing into world no 1 brand in its segment but, still thats and highly optimistic view of the future. As for the Corus is concerned it was the best deal they could have got, at around 68% premium of there then existing cost. They got entry into the developing Asian markets and now have access to cheaper
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production model and raw materials of the TATA STEEL and with the new name TATA STEEL UK the only way is the way forward.

Bibliography
ollowing websites have been very useful in providing in -depth information about the merger

y y y y y

www.wikipedia.com www.moneycontrol.com www.businesstoday.in www.Gaurdain.co.uk www.telegraph.co.uk

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