The Merging of TATA and Corus Strategic - Case Study Example

The Acquisition…
On January 31, 2007, Tata Steel Limited (Tata Steel), one of the leading steel producers in India, acquired the Anglo-Dutch steel producer Corus Group Plc (Corus) for US$ 12.11 billion (€ 8.5 billion). This acquisition was the biggest overseas acquisition by an Indian company. Tata Steel emerged as the fifth-largest steel producer in the world after the acquisition. The acquisition gave Tata Steel access to Corus's strong distribution network in Europe.

The Merging Entities…
Established in 1907 by its Founder J N Tata, Tata Steel is the flagship of Tata Group, the largest and most respected business house in India having interests in Steel, Automobiles, Telecom, IT, Energy, and Hotels. The Tata Group comprises around 90 companies with a total turnover of US$22 billion, the equivalent to around 3 percent of India’s GDP.
Tata Steel has one of the most modern steel-making facilities and is also one of the lowest-cost producers of steel in the world. It has been rated as the world’s best steel company for the past three consecutive years by World Steel Dynamics. World over, Tata Steel currently has a capacity of around 26 million tonnes per annum including its recent takeover of Corus and has the second-largest global distribution network in 45 countries. Tata Steel which has also set benchmarks in the fields of corporate social responsibility and corporate governance firmly believes in improving the quality of life of its employees and the communities it serves. Tata Steel aspires to become a 50 Million tonne Steel Company by 2015.
Corus was formed on 6th October 1999 through the merger of British Steel and Koninklijke Hoogovens. Corus was the 2nd largest producer of Steel in Europe.
The Bidding War...
It was a little hard for TATA Steel to swallow Corus as CSN, a Brazilian company was also in the race. The bidding war between Tata Steel and Brazilian company CSN was riveting and ended in a rapid-fire auction. Initial reactions to the deal are highly diverse and retail investors are completely puzzled by the market reaction.

Managing Finance for the deal…
TATA Steel had announced the refinancing of its GBP 3,260 million acquisition bridge facility and the revolving facility provided by ABN AMRO and Deutsche Bank, the financing formalities were finished by April 2, 2007. The refinancing was also arranged which amounted to GBP 3,170 million and was done by a syndicate led by Citigroup, ABN AMRO, and Standard Chartered Bank. This refinancing provides significant benefits and flexibility over the term of the financing to the group.
The Refinancing Facility comprises a five-year GBP 1670 million amortizing loan which will be syndicated by the joint book runners to relationship banks of Tata Steel and Corus and a seven-year minimally amortizing term loan of GBP 1500 million that will be syndicated to institutional investors and banks in the US, Europe, and Asia. The balance amount of the acquisition bridge is being repaid by an additional equity contribution by Tata Steel / Tata Steel Asia which had been previously disclosed on April 17, 2007.
The Deal Development
• On October 20, 2006, Tata Steel announced that it had agreed to pick up a 100% stake in the Anglo-Dutch steel maker Corus Group at 455 p. per share in an all-cash deal, cumulatively valued at GBP 4.3 billion (USD 8.04 billion).
• On November 19, 2006, the Brazilian steel company CSN launched a counteroffer for Corus at 475 pence per share, valuing it at $8.4 billion.
On December 11, 2006, Tata preemptively upped the offer to 500 pence, which was within hours trumped by CSN's offer of 515 pence per share, valuing the deal at $ 9.6 Billion. The Corus board promptly recommended both the revised offers to its shareholders.
On December 19, 2006, Corus announced the following:
In the light of the competing offers for Corus by Tata Steel UK Limited (“Tata”) and CSN Acquisitions Limited (“CSN”), the Company announced on 12 December 2006 that the Corus Directors intended to propose resolutions to shareholders at each of the reconvened EGM and Court Meeting to be held on 20 December 2006 to adjourn those meetings. The Company also stated that it would announce a proposed date for those adjourned meetings in due course
(http://en.wikipedia.org/wiki/Corus_Group)
On January 31 2007 Tata Steel won their bid for Corus after offering 608p per share, valuing Corus at £6.7 bn ($11.3bn); as a result and pending acceptance and completion of the takeover, the joining of the two will create the fifth largest steel company in the world.
Strategic Reasons behind the Deal
Corus, being the second largest steelmaker in Europe, would provide Tata Steel access to some of the largest steel buyers. The acquisition would open new markets and product segments for Tata Steel, which would help the company to de-risk its businesses through wider geographical reach.