Tata Acquires Corus

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INVESTMENT BANKING

acquisition| tata acquires corus|

SUBMITTED TO

MAAM HUMA AYUB

SUBMITTED BY

MUHAMMAD ARSLAN
SEHRISH MUSHTAQ
DURDANA IRSHAD
AGHA NAWAZISH
ZUHAIB GUL
BBA- 8 A-C

DATE10-01-2011

ACKNOWLEDGEMENT

First and foremost we are thankful to Allah for giving us the mind to think, heart to feel and strength to complete this report.

We would also like to thank our course instructor, Ma’am Huma Ayub for her advice and suggestions to this report. Without the assistance of her, it would have been difficult and stupendous for our group with meager resources at its disposal to accomplish it

TABLE OF CONTENTS

INTRODUCTION1
TATA STEEL2
EXPANSION PROGRAM2
MODERNIZATION PROGRAM3
CORPORATE SOCIAL RESPONSIBILITY3
SWOT ANALYSIS4
POLICIES OF TATA STEEL5
CORUS COMPANY6
SWOT ANALYSIS7
REASONS BEHIIND THE ACQUISITION9
TATA9
CORUS10
SYNERGIES BETWEEN TATA STEEL AND CORUS11
ACQUISITION DEAL12
ADVISORS TO THIS DEAL13
TATA ADVISORS13
CORUS ADVISORS13
VALUING THE ACQUISITION14
FINANCING THE DEAL14
WHY CASH DEAL?15
CRITICAL ANALYSIS16
POST ACQUISITION BENEFITS16
ANALYZING THE CORPORATE ADVISORS17
ANALYZING THE DEAL AND ITS EFFECTS ON THE COMPANY17
POST ACQUSITION SCENARIO18
CONCLUSION19

TABLE OF FIGURES

Figure 1 Overview Of Acquireri
Figure 2 Means for Financing the Deali
Figure 3 Sources of Equityii
Figure 4 Total Sources Identified For Financingiii
Figure 5 Post Acquisition Benefitsiii

INTRODUCTION

“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)

Tata Steel (part of the Tata Group based in India) acquired the Anglo-Dutch steel firm Corus after a four month bidding war with Brazil’s CSN (Companhia Siderurgica Nacional SA) for US$12 billion—this was the biggest acquisition by an Indian firm. Tata’s acquisition of Corus made it the fifth largest global steel producer with an annual capacity to produce 25 million tons of steel. The acquisition was intended to give Tata Steel access to European markets and to achieve potential synergies in the areas of manufacturing, procurement, R&D, logistics, and back office operations.

Over the past few years, Indian companies had made global acquisitions for over $10 billion. The Tata bid almost equals this amount. Most of them have averaged $100 to 200 million. "It is a two-way street now," Kamal Nath (Commerce Minister, India) said. "Not only India is seeking foreign investment, but Indian companies are emerging investors in other countries."

Until the 1990s, not many Indian companies had contemplated spreading their wings abroad. An Indian corporate or group company acquiring a business in Europe or the U.K. seemed possible only in the realm of fantasy. The reports of United Nations Conference on Trade and Development (UNCTAD) and other organizations have recorded the fact that nowadays Foreign Direct Investment (FDI) is more likely to flow in through cross border mergers (and not through Greenfield Projects). Though Corus is four times bigger than Tata but in the year 2006 the operating profit for Tata was $840 million, whereas in case of Corus it was $860 million. There are some major inputs, which leads Tata towards this huge profit. Critics claimed that the acquisition price at 608 pence per share was substantially higher than an earlier offer of 455 pence per share. Additionally, they felt that it would take several years for potential production and operational synergies to materialize that would yield significant cost savings.. This acquisition process has started long back in the year 2005. However, Corus was involved in a considerable number of Merger & Acquisition (M&A) deals and joint ventures (JVs) before Tata. This process started in the year 2000 and with Tata it came...
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