1. TATA STEEL’S ACQUISITION OF
CORUS

2. OUTLINE
 TATA STEEL background
 CORUS background
 Rationale for the acquisition
 Synergies expected from the deal
 Funding structure of the deal
 Long-term implications of the deal

3. TATA STEEL BACKGROUND
 A part of TATA Group of Company’s.
 Formerly known as TISCO and TATA IRON AND STEEL
COMPANY LIMITED.
 Located in Jamshedpur, Jharkhand, India.
 World’s 7th largest steel company.
 India’s 2nd largest and 2nd most profitable private sector company.
 Data as per March 31, 2008
Capacity = 31 million tones
Revenues = 132,110 crore
Net profit = 12,350 crore

4. CORUS BACKGROUND
 One of the largest steel companies in Europe.
 Came into being in 1999 with the merger of British Steel plc and
Dutch steelmaker.
 Also has a presence in The Netherlands, Germany, France,
Belgium, the United States, and Canada.
 The company manufactures, processes, and distributes metals
products to the construction, automotive, mechanical engineering,
packaging, and other markets.

5. THE ACQUISITION AND THE
RATIONALE BEHIND IT
Rationale
TATA CORUS
To tap mature European market. To extend its Global reach through
Helped TATA to feature in Top 10 TATA.
players in world. To get access to Indian Ore
Technological benefits. reserves, as well as virgin market for
Corus holds number of patents and steel.
R&D facilities. To get access to low cost materials.
Cost of acquisition is lower than Saturated market of Europe.
setting up of Green field plant & Decline in market share and profit.
marketing and distribution channel.
TATA manufactures Low Value, long
and flat steel products ,while Corus
produce High Value Stripped
products.

6. SYNERGIES EXPECTED FROM THE
DEAL
 Tata was one of the lowest cost steel producers & Corus was
fighting to keep its productions costs under control.
 Tata had a strong retail and distribution network in India and SE
Asia. Hence there would be a powerful combination of high
quality developed and low cost high growth markets
 Technology transfer and cross-fertilization of R&D capabilities.
 There was a strong culture fit between the two organizations both
of which highly emphasized on continuous improvement and
Ethics.
 Economies of Scale.
 Increase in profitability.
 Backward integration for Corus and Forward integration for Tata
Steel.

7. FUNDING STRUCTURE
It was a CASH DEAL because-
 Immediate takeover was required.
 Share Swap deal would have been less attractive to the Corus shareholders.
 Share Swap would have meant FDI and that brings a lot of regulatory hassles
which might not have been accepted by Corus shareholders.
 Share Swap would have diluted Tata Steel’s Equity base which was not in
favor of Tata shareholders.
 And moreover cost of equity at around 15% is higher than that of debt of
around 8%, so paying in cash brings down the cost of acquisition.
Equity + Loan = Deal
$3.95 + ($3.654 + $2.233 + $2.233) = $12.07

8. LONG - TERM IMPLICATIONS
 Integration has to be fast and efficient.
 Increasing reach to joint entity to 4 continents and 45 countries
including high value market of Europe.
 Increasing the EBITDA to 25% for joint entity by executing Tata
steel’s brownfield and greenfield projects well in time.
 Increasing the capacity of the company beyond 50 million tons
by 2015 so as to become one of 3 top steel producers in the
world.