Group Tata Corus

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MERGERS & ACQUISITION

Presented By:-

Anil Bhardwaj

Vivek Gulhare


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About TATATata Steel , formerly known as TISCO (Tata Iron and Steel CompanyLimited), was the world's 56th largest and India's 2nd largest steelcompany with an annual crude steel capacity of 3.8 million tonnes.

It is based in Jamshedpur, Jharkhand, India. It is part of the Tata Group ofcompanies.

Post Corus merger, Tata Steel is India's second-largest and second-mostprofitable company in private sector with consolidated revenues of Rs

1,32,110 crore and net profit of over Rs 12,350 crore during the yearended March 31, 2008.

The company was also recognized as the world's best steel producer byWorld Steel Dynamics in 2005. The company is listed on BSE and NSE;and employs about 82,700 people (as of 2007).


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About CorusCorus was formed from the merger of Koninklijke Hoogovens N.V. with British SteelPlc on 6 October 1999.It has major integrated steel plants at Port Talbot, South Wales; Scunthorpe, NorthLincolnshire; Teesside, Cleveland (all in the United Kingdom) and IJmuiden in theNetherlands.

It also has rolling mills situated at Shotton, North Wales (which manufacturesColorcoat products), Trostre in Llanelli, Llanwern in Newport, South Wales,Rotherham and Stocksbridge, South Yorkshire, England, Motherwell, NorthLanarkshire, Scotland, Hayange, France, and Bergen, Norway.

In addition it has tube mills located at Corby, Stockton and Hartlepool in England andOosterhout, Arnhem, Zwijndrecht and Maastricht in the Netherlands.

Group turnover for the year to 31 December 2005 was 10.142 billion. Profits were

580 million before tax and 451 million after tax.


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Key Dates

Septem ber 20, 2006 : Corus Steel has decided to acquire a strategicpartnership with a Company that is a low cost producerOc to ber 5, 2006 : The Indian steel giant, Tata Steel wants to fulfill itsambition to Expand its business further.Oc to ber 6, 2006 : The initial offer from Tata Steel is considered to be too lowboth by Corus and analysts.Oc to ber 17, 2006 : Tata Steel has kept its offer to 455p per share.Oc to ber 18, 2006 : Tata still doesnt react to Corus and its bid price remains

the same.Oc to ber 20, 2006 : Corus accepts terms of 4.3 billion takeover bid fromTata SteelOc to ber 23, 2006 : The Brazilian Steel Group CSN recruits a leadinginvestment bank to offer advice on possible counter- offer to Tata Steels bid.


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Oc to ber 27, 2006 : Corus is criticized by the chairman of JCB, Sir AnthonyBamford, for its decision to accept an offer from Tata.No vem ber 3, 2006 : The Russian steel giant Severstal announces officiallythat it will not make a bid for CorusNo vem ber 18, 2006 : The battle over Corus intensifies when Brazilian groupCSN approached the board of the company with a bid of 475p per shareDecem ber 18, 2006 : Within hours of Tata Steel increasing its original bid forCorus to 500 pence per share, Brazil's CSN made its formal counter bid forCorus at 515 pence per share in cash, 3% more than Tata Steel's

Offer.Jan uary 31, 2007 : Britain's Takeover Panel announces in an e-mailedstatement that after an auction Tata Steel had agreed to offer Corusinvestors 608 pence per share in cashA pr il 2, 2007 : Tata Steel manages to win the acquisition to CSN and has

the full voting support from Corus shareholders

Continued


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PROFILE PRE MERGER

102 years in steel

bazaarWorlds 56th largestCapacity of 30 Million

Founder:J.N. TataPresence in 26 nations

Worlds 6 th largest

2nd in Europe,1 st inUK371 st rank in fortune

listPresence in 50nations40,000 peopleworldwide.

TATA STEEL CORUS


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Deal

TATA-CORUSTata acquired Corus, which is four times largerthan its size and the largest steel producer in the

U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever foreigntakeover and follows Mittal Steel's $31 billionacquisition of rival Arcelor in the same year.Tata acquired Corus on the 2nd of April 2007 fora price of $12 billion. The price per share was608 pence(rs 484), which is 33.6% higher than

the first offer which was 455 pence.


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Financing the Deal

TATA- CORUS Deal - $12 billion

Equity Contribution from Tata Steel- $3.88 billion

Credit Suisse leaded, joined by ABN AMRO andDeutsche Bank in the consortium.

Of the $ 8.12 billion of financing , Credit Suisseprovided 45% and ABN AMRO and Deutscheprovided 27.5% each.


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objective behind this deal

To tap European Mature Market. Cost of acquisition is lower than setting up ofGreen field plant & marketing and distribution

channel. TATA manufactures Low Value ,long and flatsteel products ,while Corus produce High ValueStripped products. Helped TATA to feature in Top 10 players inworld. Technology Benefit. Economic of scale. Corus holds number of patents and R&D


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Reasons for Corus to be sold

A chance to Bail out of Debt and Financialstress. Access to cheap high quality Iron ore fromIndia. Corus had high cost of production. Though Corus had revenues of $18.06 bn ,itsprofit was just $626 mn (TATAs revenue was $4.84 bn and profit $824 mn)


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competitive advantages

Operational Excellence(low cost producer)

Product Leadership(best product)

Customer Intimacy(best total solution)

TATACORUS


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Ranking(Ranking of Tata steel before deal- 56 )

Company Capacity (in million tonnes)

Arcelor - Mittal 110.0

Nippon Steel 32.0

Posco 30.5

JEF Steel 30.0

Tata Steel - Corus (5 th ) 27.7

Bao Steel China 23.0

US Steel 19.0

Nucor 18.5

Riva 17.5

Thyssen Krupp 16.5


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5 Yr. Financial performance ofTata Steel


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5 Yr. Financial performance ofCorus


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Effect on balance sheet ?Particulars After Tata Corus deal

Currency: Rupee MillionsTATA Steel Ltd

Currency: Rupee Millions

Year 2009 2008 2007 2006 2005 2004

ASSETS 56650.78 45322.42 23741.48 205,450.70 177,033.10 147,988.70

DEBTS 26946.18 18021.69 9645.33 45,932.70 42,073.10 39,982.90

LIABILITIES 8965.76 6842.26 6349.24 30492.10 33146.80 32665.90

Equity Sharecapital

730.79 730.78 580.67 553.67 553.67 369.18

Book value 331.68 298.78 240.31 176.26 127.56 122.79


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TATA Steel before &

After


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After Acquisition Analysis

TATA Steel Paid 7 Times EBITDA of Corus Enterprise Value. Also,9 times EBITDA for 12 Months ended 30th September 2006. Aggregate crude steel production capacity of around 28.1 milliontonnes. Global Player with a balanced presence in developed European andfast growing Asian Markets. Greenfield and Brownfield developments. May 07 EBITDA of 13 %, 25 mn tonnes of production ,Ranked 5 th 2012 EBITDA of 25 %,40 mn tonnes of production, Ranked 2 nd The group is growing aggressively and targets 50 mn tonne capacity by2015.


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Benefits of the deal

Augmented its crude steel capacity to 27 mtpaThe combined entity forms the 5th largest Steelcompany

The merged entity has brought Tata Steel to theworld platform Provided Tata Steel access to new markets and

presence across the steel value chainMuch broader distribution network


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Key Findings (Facts)

On January 31, 2007, Tata Steel Limited (TataSteel), one of the leading steel producers inIndia, acquired the Anglo Dutch steel producer

Corus Group Plc (Corus) for US$ 12.11 billion ( 8.5 billion).

The process of acquisition concluded only afternine rounds of bidding against the other bidderfor Corus - the Brazil based CompanhiaSiderurgica Nacional (CSN).


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This acquisition was the biggest overseas acquisition byan Indian company. Tata Steel emerged as the fifthlargest steel producer in the world after the acquisition.

The acquisition gave Tata Steel access to Corus' strongdistribution network in Europe.

Corus' expertise in making the grades of steel used in

automobiles and in aerospace could be used to boostTata Steel's supplies to the Indian automobile market.

Corus in turn was expected to benefit from Tata Steel's

expertise in low cost manufacturing of steel.


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However, some financial experts claimed that the pricepaid by Tata Steel (608 pence per share of Corus) forthe acquisition was too high.

Corus had been facing tough times and had reported asubstantial decline in profit after tax in the year 2006.

Moreover, since the acquisition was done through an allcash deal, analysts said that the acquisition would be afinancial burden for Tata Steel.


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Tata was one of the lowest cost steel producers in theworld and had self sufficiency in raw material . Coruswas fighting to keep its productions costs under controland was on the look out for sources of iron ore.

Tata had a strong retail and distribution network in Indiaand SE Asia. This would give the Europeanmanufacturer a in-road into the emerging Asian markets.


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Tata was a major supplier to the Indian auto industry andthe demand for value added steel products was growingin this market.

Corus' expertise in making the grades of steel used inautomobiles and in aerospace could be used to boostTata Steel's supplies to the Indian automobile market.

Hence there would be a powerful combination of highquality developed and low cost high growthmarkets.


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There would be technology transfer and cross-fertilization of R&D capabilities between the two companies that specialized in differentareas of the value chain

There was a strong culture fit between the two organizations both of which highly emphasized on continuous improvement andethics.

Tata steel's Continuous Improvement Program Aspirewith the corevalues : Trusteeship, integrity, respect for individual, credibility andexcellence.

Corus's Continuous Improvement Program The Corus Way withthe core values : code of ethics, integrity, creating value in steel,


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Conclusion

With Corus in its fold, Tata Steel can confidently targetbecoming one of the top-3 steel makers globally by 2015.The company would have an aggregate capacity of closeto 56 million tones per annum, if all the planned

Greenfield capacities go on stream by then.

We can conclude that if the acquisitions well planned ,Executed and the necessary precautions taken for the

deal a company can achieve its strategic objectives andthus ensure its growth through Acquisition.


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Documents

Group Tata Corus