The Tata & Corus M&a Deal
The Tata–Corus Merger:
A Visionary Deal or a
‘Winner’s Curse’?
During the last decade, Tata Steel took forward plans to hone their growth as a steel manufacturer through a series of global acquisitions.
In turn, their initiatives allowed them to grow far beyond the domestic market and service the growing global demands for steel. For both India and Tata Steel, the biggest foreign acquisition to date was that of the
Corus Group, a European steel manufacturer headquartered in the UK.
Finalizing the deal proved challenging, as Tata Steel entered a bidding war with the Brazilian steel manufacturer Companhia Siderurgica
Nacional (CSN). Finally, a revised offer that was 30 per cent more than their initial bid enabled the acquisition of the European entity.
Many financial analysts were in agreement that the final bid put forward by Tata Steel was over and beyond Corus’ earnings, which ultimately led to a substantial drop in their share prices by as much as 9 per cent. Apart from the debt that Tata acquired as a consequence of completing the acquisition, there were additional managerial challenges to consider, which frequently arose with this type of venture.
Would the acquisition of Corus create more wealth for Tata shareholders or was it merely destined to become a ‘winner’s curse’?
1.1 Background
Tata Steel, formerly named The Tata Iron and Steel Company, was established by Sir Jamsetji Tata in 1907. The century that followed commenced with modest investments in India to expand and modernize their main facility, located in the town of Jamshedpur. Over the years, their production capacity grew steadily from 1 million tonnes per
99780230300637_02_cha01.indd 1 780230300637_02_cha01.indd 1 110/13/2011 3:04:03 PM 0/13/2011 3:04:03 PM
PROOF2 The Tata–Corus Merger annum (MTPA) (Rodriguez, 2007), allowing Tata Steel to become
India’s largest private-sector steel company by 2006. In the global market, however, the company
A Visionary Deal or a
‘Winner’s Curse’?
During the last decade, Tata Steel took forward plans to hone their growth as a steel manufacturer through a series of global acquisitions.
In turn, their initiatives allowed them to grow far beyond the domestic market and service the growing global demands for steel. For both India and Tata Steel, the biggest foreign acquisition to date was that of the
Corus Group, a European steel manufacturer headquartered in the UK.
Finalizing the deal proved challenging, as Tata Steel entered a bidding war with the Brazilian steel manufacturer Companhia Siderurgica
Nacional (CSN). Finally, a revised offer that was 30 per cent more than their initial bid enabled the acquisition of the European entity.
Many financial analysts were in agreement that the final bid put forward by Tata Steel was over and beyond Corus’ earnings, which ultimately led to a substantial drop in their share prices by as much as 9 per cent. Apart from the debt that Tata acquired as a consequence of completing the acquisition, there were additional managerial challenges to consider, which frequently arose with this type of venture.
Would the acquisition of Corus create more wealth for Tata shareholders or was it merely destined to become a ‘winner’s curse’?
1.1 Background
Tata Steel, formerly named The Tata Iron and Steel Company, was established by Sir Jamsetji Tata in 1907. The century that followed commenced with modest investments in India to expand and modernize their main facility, located in the town of Jamshedpur. Over the years, their production capacity grew steadily from 1 million tonnes per
99780230300637_02_cha01.indd 1 780230300637_02_cha01.indd 1 110/13/2011 3:04:03 PM 0/13/2011 3:04:03 PM
PROOF2 The Tata–Corus Merger annum (MTPA) (Rodriguez, 2007), allowing Tata Steel to become
India’s largest private-sector steel company by 2006. In the global market, however, the company