MERGERS & ACQUISITION

To: Mrs. Drashti Shah By: Group A

Kushal Bhagat (02) Soyeb Jindani (14) Ashish Sakariya (46)

About TATA

Tata Steel, formerly known as TISCO (Tata Iron and Steel Company Limited), was the world's 56th largest and India's 2nd largest steel company 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 of companies.

Post Corus merger, Tata Steel is India's second-largest and second-most profitable company in private sector with consolidated revenues of Rs 1,32,110 crore and net profit of over Rs 12,350 crore during the year ended March 31, 2008. The company was also recognized as the world's best steel producer by World Steel Dynamics in 2005. The company is listed on BSE and NSE; and employs about 82,700 people (as of 2007).

About Corus

Corus was formed from the merger of Koninklijke Hoogovens N.V. with British Steel Plc on 6 October 1999.
It has major integrated steel plants at Port Talbot, South Wales; Scunthorpe, North Lincolnshire; Teesside, Cleveland (all in the United Kingdom) and IJmuiden in the Netherlands. It also has rolling mills situated at Shotton, North Wales (which manufactures Colorcoat products), Trostre in Llanelli, Llanwern in Newport, South Wales, Rotherham and Stocksbridge, South Yorkshire, England, Motherwell, North Lanarkshire, Scotland, Hayange, France, and Bergen, Norway. In addition it has tube mills located at Corby, Stockton and Hartlepool in England and Oosterhout, Arnhem, Zwijndrecht and Maastricht in the Netherlands. Group turnover for the year to 31 December 2005 was 10.142 billion.

Key Dates

September 20, 2006 : Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer October 5, 2006 : The Indian steel giant, Tata Steel wants to fulfill its ambition to Expand its business further. October 6, 2006 : The initial offer from Tata Steel is considered to be too low both by Corus and analysts. October 17, 2006 : Tata Steel has kept its offer to 455p per share. October 18, 2006 : Tata still doesnt react to Corus and its bid price remains the same. October 20, 2006 : Corus accepts terms of 4.3 billion takeover bid from Tata Steel October 23, 2006 : The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steels bid.

Continued

October 27, 2006 : Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata. November 3, 2006 : The Russian steel giant Severstal announces officially that it will not make a bid for Corus

November 18, 2006 : The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475p per share
December 18, 2006 : Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazil's CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel's Offer. January 31, 2007 : Britain's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash April 2, 2007 : Tata Steel manages to win the acquisition to CSN and has the full voting support from Corus shareholders

PROFILE PRE MERGER

TATA STEEL

CORUS

102 years in steel bazaar Worlds 56th largest Capacity of 30 Million Founder:J.N. Tata Presence in 26 nations

Worlds 6th largest 2nd in Europe,1st in UK 371st rank in fortune list Presence in 50 nations 40,000 people worldwide.

Achievement of Business Objective

Business Resources Structure Culture M&A Strategy Objective

Leadership Person

Deal

TATA-CORUS Tata acquired Corus, which is four times larger than its size and the largest steel producer in the U.K. The deal, which creates the world's fifthlargest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the same year. Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence(rs 484), which is 33.6% higher than the first offer which was 455 pence.

Financing the Deal

TATA- CORUS Deal - $12 billion

Equity Contribution from Tata Steel- $3.88 billion Credit Suisse leaded, joined by ABN AMRO and Deutsche Bank in the consortium. Of the $ 8.12 billion of financing , Credit Suisse provided 45% and ABN AMRO and Deutsche provided 27.5% each.

objective behind this deal

Gain market share Economies of scale Enter new markets Acquire technology Utilization of surplus funds: surplus fund mean cash flow available after the payment of tax. It is the remaining money after all liabilities including tax, insurance and expenses. Managerial Effectiveness: it is base on 3 views. Traditional perspective, organizational and individual. Strategic Objective: It is base on the mission n vision statement that how they fulfill or move

steps

Finding A Target Business Appointing Advisers Negotiating terms Due Diligence Exchange of Contracts Completion

Legal Documents

Share sale Agreement The shares being sold The Price Restrictive Agreements Warranties Conditions to the Deal Transferring tangible assets Transferring Intangible assets The Tax Deed: Transferring Liabilities Transferring Employees The Disclosure Letter:

Post acquisition problems

1.

2.
3. 4. 5. 6. 7.

Time Factor Leadership style differences Whos in charge? (Who won?) Organic vs. bureaucratic cultures Open vs. closed communication Decision making speed & style Structures that dont match

competitive advantages
Product Leadership (best product)

Operational Excellence (low cost producer)

Customer Intimacy (best total solution)

Strategy: Disciplines, Priorities

Operational Excellence Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all 'Once and Done'

Product Leadership New products or services Risk takers Meet volatile customer needs Never satisfied obsolete own and competitors' products Learning organization

Customer Intimacy Easy to do business with Have it your way (customization) Market segments of one

Proactive, flexible
Relationship and consultative selling Cross selling

Ranking
(Ranking of Tata steel before deal- 56) Company Arcelor - Mittal Nippon Steel Posco JEF Steel Tata Steel - Corus (5th) Bao Steel China US Steel Nucor Riva Thyssen Krupp Capacity (in million tonnes) 110.0 32.0 30.5 30.0 27.7 23.0 19.0 18.5 17.5 16.5

Effect on balance sheet ?

Particulars After Tata Corus deal Currency: Rupee Millions
2009 2008 2007

TATA Steel Ltd Currency: Rupee Millions

2006 205,450.70 2005 2004

Year

ASSETS

56650.78

45322.42

23741.48

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 Share capital Book value

730.79

730.78

580.67

553.67

553.67

369.18

331.68

298.78

240.31

176.26

127.56

122.79

Benefits of the deal

Augmented its crude steel capacity to 27 mtpa The combined entity forms the 5th largest Steel company The merged entity has brought Tata Steel to the world platform Provided Tata Steel access to new markets and presence across the steel value chain Much broader distribution network

Analysis

It is a two-way street now. Can anyone explain how ???

Key Findings (Facts)

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). The process of acquisition concluded only after nine rounds of bidding against the other bidder for Corus - the Brazil based Companhia Siderurgica Nacional (CSN).

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' strong distribution network in Europe. Corus' expertise in making the grades of steel used in automobiles and in aerospace could be used to boost Tata 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.

However, some financial experts claimed that the price paid by Tata Steel (608 pence per share of Corus) for the acquisition was too high. Corus had been facing tough times and had reported a substantial decline in profit after tax in the year 2006.

Moreover, since the acquisition was done through an all cash deal, analysts said that the acquisition would be a financial burden for Tata Steel.

Tata was one of the lowest cost steel producers in the world and had self sufficiency in raw material. Corus was fighting to keep its productions costs under control and was on the look out for sources of iron ore. Tata had a strong retail and distribution network in India and SE Asia. This would give the European manufacturer a in-road into the emerging Asian markets.

Tata was a major supplier to the Indian auto industry and the demand for value added steel products was growing in this market. Corus' expertise in making the grades of steel used in automobiles and in aerospace could be used to boost Tata Steel's supplies to the Indian automobile market.

Hence there would be a powerful combination of high quality developed and low cost high growth markets.

There would be technology transfer and cross-fertilization of R&D capabilities between the two companies that specialized in different areas of the value chain There was a strong culture fit between the two organizations both of which highly emphasized on continuous improvement and ethics. Tata steel's Continuous Improvement Program Aspirewith the core values : Trusteeship, integrity, respect for individual, credibility and excellence. Corus's Continuous Improvement Program The Corus Way with the core values : code of ethics, integrity, creating value

Synergies such as ..
1. 2. 3. 4.

in manufacturing, access to global customers, opening India to Corus or leveraging research and development for Tata Steels greenfield projects. It hopes these will save costs up to $350 million per year. The combined entity could also scout for more acquisitions together effectively it is eyeing more buyouts in finished steel and iron ore.

Conclusion

With Corus in its fold, Tata Steel can confidently target becoming one of the top-3 steel makers globally by 2015. The company would have an aggregate capacity of close to 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 and thus ensure its growth through Acquisition.

Now Q & A session.