Presented by Kavitha Ananth-73 Divya Kudva-75 Arun Nambiar-81 Nibha Chandrashekar-83 Rasika Shitut-93

Tata Steel & Indian Steel Industry

Established in 1907

Asias first and Indias largest private sector

Main marketsUSA, Indonesia, Italy

Production of steel in India increased from 1.1 million tonnes to 51.9million tonnes in 2006

Global Steel Industry

Demand for steel reduced in 2006-07 IISI forecast for industry growth stood at 4.2% for 2010-15 Majority of demand from India and China Benefit in the long run due to consolidation of market

Corus & Steel Production In U.K.

Europes second largest steel producer. Corus group-merger between British steel and Koninklijke Hoogovens. Products and services Revenue of 10142 million GBP in 2005.

Sep 20,06

Corus Steel has decided to acquire a strategic partner.

Oct 5,06

The Indian steel giant, Tata Steel decides to expand its business further.
The initial offer from Tata Steel is considered to be too low both by Corus. Tata Steel has kept its offer to 455p per share. Tata still doesnt react to Corus and its bid price remains the same. Corus accepts terms of 4.3 billion takeover bid from Tata Steel. Brazilian steel group CSN decides to make counter offer.

Oct 6,06

Oct 17,06

Oct 18,06

Oct 20,06

Oct 23,06

Oct 27,06

JCB chairman Sir Anthony Bamford criticizes Corus for accepting Tatas offer. The Russian steel giant Severstal announces it will not compete. CSN group approaches Corus with an offer of 475 pence per share. Corus decides to consider CSNs offer in the best interest of the company.

Nov 3,06

Nov 18,06

Nov 27,06

Dec 18,06

Tata Steel increasing its original bid for Corus to 500 pence per share CSN makes its counter bid for 515 pence per share.
Tata Steel had agreed to offer Corus investors 608 pence per share in cash. Tata Steel manages to win the acquisition to CSN.

Jan 31,07

April 2,07

Reasons for Corus for Acquisition

Saturated market of Europe To extend its global reach through Tata To get access to low cost Indian Ore reserves Decline in market share and profit Total debt of Corus was 1.6 Bn GBP

Vision behind Acquisition

Surplus cash with TATA Cost of acquisition is lower than setting up green field plant and marketing and distribution channel. Operational benefits: Acquisition would help Tata to feature in top 10 players in the world Presence in Europe / To tap European mature market

Strong R&D of Corus - Technology benefit to TATA

Corus interested in India Tata manufactures low value long and fast steel products while Corus produced high value stripped products Economies of scale

Process
Appointing Advisors
Negotiating Terms Due Diligence

Exchange of contracts
Completion

The Deal
Tata Steel (India)

Tata Steel Holdings Asia (Singapore)

Tata Steel UK (SPV)

Corus Group Ltd. (UK)

Financing Acquisition
Acquisition funded through a debt-equity
Exposure of Tata Steel Rest of the funding - through long term loans taken by SPV created in UK Loan will be serviced out of Coruss cash flows Raising the equity component in the form of preferential offer by Tata Steel to Tata Sons, or through GDR or rights offer to shareholders

Leveraged Buyout

Cost of Deal
Tata proposed - A price of

455 Pence 608 Pence

CSN bid 603 pence.

68% more than value of Corus share

Equity Capital(Tata Steel) - $ 4.1 Bn

Borrowings & other sources - $ 8.8 Bn

Enterprise Value - $ 12.9 bn

Cost of Deal
USD 6.2 billion of term debt with an average life of around 5 years $ 2.27 bn of equity and convertible preference shares on a rights basis. $ 875 million in Convertible Alternate Reference Securities (CARS)

Leveraged Buyout- Loan taken by SPV and served by Cashflows of Corus

The syndication of the debt with participation by more than 25 banks and institutions Tata Steel : Annul report 2007-08

5 years convertible instrument with a coupon of 1% and a conversion premium of 35% to the prevailing market price in August 2007

Cost of Deal
Particulars Equity capital from Tata Steel Long-term debt from consortium of banks Quasi-equity funding at Tata Steel Asia Singapore Long-term capital funding at Tata Steel Asia Singapore $ $4.10 billion $6.14 billion $1.25 billion $1.41 billion

Total

$12.90 billion

8 bn Debt

8%- Expected annual Interest = $ 640 ml + Existing Interest amount = $ 725 ml

http://www.tata.com/company/releases/inside.aspx?artid=SwWIS8iEnOk=

Why cash-deal?

Immediate Takeover possible

Swap-share deal : Unattractive

Post-acquisition Strategies
Tata steel's Continuous Improvement ProgramASPIRE Corus's Continuous Improvement Program- The Corus Way

Tata used Light Handed Integration Approach

Top management remained the same.

Post Acquisition Management

A cultural fit and similar work practices Adopted several system integrations Created several Taskforce Teams Organizational structure for Group Strategy Function

Seven-member integration committee

Ratan Tata (Chairman of the Tata group)

Tata Steel > Managing Director- B Muthuraman > Deputy Managing Director (steel) -T Mukherjee > Chief Financial Officer -Kaushik Chatterjee

The Corus group > CEO -Phillipe Varin > Executive director (finance)- David Lloyd > Division director (strip products)Rauke Henstra

Synergies from the deal

Cost of steel

Retail and distributio n network

Technology transfer and R&D capabilities

Strong culture fit

Increase in profitabili ty

Backward integration for Corus & Forward integration for Tata Steel

Impact of acquisition of Corus (financials)

Particulars Production capacity Net sales Finished & Semi Finished products Raw materials consumed Freight & Handling charges Interest charges Fixed Assets Debtors Loans Pre Acquisition 7 million tonnes 25,213 crores 5,682 crores 3,489 crores 1,508 crores 411 crores 14,221 crores 1,687 crores 24,926 crores Post - Acquisition 23 million tonnes 1,31,536 crores 26,270 crores 33,325 crores 6,005 crores 4,184 crores 41,963 crores 18,697 crores 53,593 crores

Pitfalls of the deal

Enterprise Value

EBITDA
Debt raised Debt equity ratio

Final word on deal

April 2, 2007 Future Prospects

Conclusion

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 player

-Ratan Tata

References References
Tata Steel: Annual Report 2006-07 Tata Steel: Annual Report 2007-08 http://www.tata.com/ http://www.tatasteel.com/ http://articles.timesofindia.indiatimes.com/2007-04-11/indiabusiness/27876944_1_tata-steel-uk-corus-shareholdersbridge-loans