Date – 18th September, 2009
TATA & CORUS
Objectives of Research
Indian Steel Market.
CORUS Steel Industry.
TATA after Acquisition.
Loss in the 1st Quarter of 2009
Conclusion and Recommendation
Indian Steel Market
Tata steel industry was the first Indian steel industry
It holds an important place in the Indian business history.
Tata started other business in India in a short span of 30
Steel industry (heavy industry) is considered as a very
influential factor in the modern economy.
India is considered as a major exporter of steel on a world
Due to this, antidumping actions has been taken by
Global Steel Market : Overview
IISI forecasts the global steel demand would be 1.32 billion
tones by 2010.
Much of these demand generated from India and China
China highest Steel producing country
Global Steel ranking
Company Capacity(in million tonnes)
Arcelor - Mittal 110
Nippon Steel 32
JEF Steel 30
Tata Steel - Corus 27.5
Bao steel China 23
US Steel 19
Corus Steel Industry
Formed on 6th Oct 1999, through merger of 2 companies : British
Steel and Koninklijke Hoogovens.
Consist of four divisions : Strip products, Long products,
Aluminum and Distribution, Building system
Operates as an International company
Core business in Manufacturing, Development and Allocation of
Aluminum and Steel products and services
Wide variety of products and services
Largest steel producer in UK with £10,142 million annual revenue
and work force of 50,000 employees
Objectives of Acquisition
TATA current EBITDA is 13% production tonnes
Global No. 6 company
By 2012, EBITDA expected is 25%, production of 40 million
tonnes giving it the position of Global number 2.
To gain access to global steel market and expand production
capacity to keep pace with growing demand for steel
Jim Leng, Chairman of Corus“This offer from Tata Steel reflects
the substantial value created for Corus shareholders
Objectives of Acquisition
TATA looking for mature market in Europe for its finished
Corus holds a number of patients and R & D facility.
Cost of Acquisition lower than setting up a green field plant
and marketing and distribution channel.
Corus wanted to reduce its employees cost and TATA is well
known for handling its labours efficiently.
As part of its integration process being done at two levels,
the steel makers expects to cross the $450 million target by
the end of 2010.
Synergy targets to be achieved included areas of
manufacturing procurement research and development, I.T.,
Finance and capital projects
Mr. B. Muthuraman (M.D. Tata Steel)
We will make the steel business into an EVA positive one by 2007
– 08 through new initiatives, to be called ASPIRE, in all relevant
areas of our business.
We will continue to be the lowest cost producer of steel in the
world by continuous improvement, benchmarking and up
We will strengthen our partnerships with our customers and
suppliers, and create mutually value creating opportunities.
Unleash people’s potential and create more leaders. This Company
has had and has many outstanding leaders.
Officially announced on April 2nd 2007.
TATA’s motive is to capture the market value.
Total value of this acquisition was $12 Billion (608 pence per share
except 603 per share).
Corus gained profitable opportunity to exit and a buyer for some
Ups and down
Sep 20, 06 : CORUS uses the strategy to work with low cost producer.
Oct 06, 06 : Initial offer by TATA is considered to be too low.
Oct 17, 06: TATA kept its offer to 455 pence per share.
Oct 20, 06 : CORUS accepts the offer of £4.3 billion.
Oct 23, 06 : Brazilian Steel Group CSN counter-offer to TATA’s offer.
Oct 27, 06 : CORUS criticized by JCB for acceptance of TATA’s offer.
Nov 18, 06 : The CSN approaches Corus With an offer of 475 pence per share
Nov 27, 06 : Board of Corus decides to give more time for shareholders to decide
whether it issue forward a formal offer.
Dec 18,06 : Tata increases its original bid for Corus 500 pence per share, then CSN
made its counter bid at 515 pence per share in cash
Jan 31, 07 : Tata had agreed to offer Corus investors 608 pence per share in cash
Apr 02, 07 : Tata steel manages to win acquisition to CSN and has the full voting
support from Corus shareholders
TATA After Acquisition
Seven member team for this DEAL.
TATA has to pay $12 billion, where 2/3rd was being financed.
After the bidding conflict with CSN, TATA ended up paying more
Still TATA earned operating profits of $840 million on sales of
5.3 million tonnes of steel, while CORUS earned $860 million
on sales of 18.6 million tones of steel.
SWOT Analysis for TATA
Lowest cost producer in world.
Experience of TATA group in doing global activity.
Stable balance sheet (Low Debt to Equity Ratio).
Corus was triple the size of TATA steel in terms of production.
Consolidation trend in Steel Industry
CSN’s lost image after failure of 2002 negotiations
To get exposed to global steel market
Brazil company CSN
Russian company Severstal
No committed financers to support the possible deal
Loss in quarter 1 of 2009 - 2010
TATA Steel posted a consolidated net loss (including Corus) of Rs
2,209 crore ($461 million).
Incurred a profit of Rs 3,901 crore ($814 million ) in the April-
June quarter of FY’09.
Sales volume of Indian operations was higher by 22 percent but sales
from its European operations (Corus) fell heavily.
Group consolidated turnover was Rs.23,292 crores as compared to
Rs. 43,496 crores.
Formulating a Research Design
Fact finding investigation with adequate interpretation.
Identifies various characteristics of organization.
Prediction is used outside the boundary of research.
Provides facts for planning action program.
Useful in Verifying Focal concepts through empirical
Reasons for Failure
Global Economic downturn.
Increase in iron ore and coal prices.
Contraction in demand from the building and automotive sectors.
Bidding Disturbance from CSN to TATA Steel
455 pence per share is pushed to 608 pence per share of Corus.
Main Competitors are CSN and SEVERSTAL
Arcelor Mittal, reported an 85% drop in core profit & Nippon
Steel, ranked No 2, booked a second consecutive quarterly loss.
Defining The Problem
Lower chance of success
Size of target company Corus
Other bidding companies like CSN etc.
Higher price per share
Less opportunity to build relationship with the target’s
Local Market reaction
Arranging funds as it was an all cash deal
Taking the TATA trust globally
Joint Ventures with other steel manufacturers
Could have searched for reserves in India, Singapore etc.
Could have diversified its investment
Expansion – If TATA steel were to create, from scratch, 19
million tonnes of steel making capacity comparable in quality
to what Corus possesses, It would end up investing 70% to
85% more than it is paying now.
Besides, setting up a new factory, a 3 to 5 years project if
everything goes well, has great execution risk.
The Contingency plan could have been a joint venture with
mittal steels as it is allready into process of setting up a big
steel unit in Orrisa, TATA could have provided them with
iron ore reserves and would have expected share in its profits
“ I believe this will be the first step in showing that Indian
industry can step outside the shores of India in an
international market place and acquit itself as a global
- Ratan Tata