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TATA- CORUS
Team
Members
Samir Madia- 67
Vineet Saraf – 86
Romeel Shah- 92
Sachin Shingare-
101
Profile - Tata Steel
• Vision – “We aspire to be the global steel industry benchmark for
Value Creation and Corporate Citizenship”.
• Global presence in over 50 developed European and fast growing
Asian markets, with manufacturing units in 26 countries.
• Ranked 56th producers in the world before Acquisition and ranked
5th after acquisition, with an annual crude steel production capacity
of 30 Million Tonnes Per Annum (MTPA).
• Self sufficient in raw material – Iron Ore 100 % ,Coal- largely self
sufficient.
• One of the lowest cost producers of steel in the world.
• Strong retail and distribution network in India and South East Asia.
Profile - Corus
• 2nd largest European steel producer
• Corus was acquired by Tata Steel in 2007 and is now part of Tata Steel
Group, which is the 6th largest global steel producer
Reasons for Tata Steel to
Bid
• To tap European Mature Market.
• Cost of acquisition is lower than setting up of Green field plant &
marketing and distribution channel.
• TATA manufactures Low Value ,long and flat steel products ,while
Corus produce High Value Stripped products.
• Helped TATA to feature in Top 10 players in world.
• Technology Benefit.
• Economic of scale.
• Corus holds number of patents and R&D facilities.
Reasons for Corus to be
sold
• A chance to Bail out of Debt and Financial stress.
• Oct 20th - Corus board accepted term of £ 4.3 bn takeover (455 pence per
share).
• Nov 3rd - Russian steel giant Severstal announces officially that it will not
make a bid for Corus .
• Nov 18th - Brazilian group CSN approached the board with bid of 475 pence
per share.
• Dec 18th - TATA increased the original bid to 500 pence per share at same
time CSN counter bid at 515 pence per share.
• Jan 31st- TATA steel wins auction(608 p/share against CSN’s last bid of
603 p/share).
• April 2nd - The deal became effective i.e. TATA won the race.
5 Yr. Financial performance of
Tata Steel
Category Unit FY`02 FY`03 FY`04 FY`05 FY`06
Tata Steel
100 %
Tata Steel UK
Ltd.
100 %
2007 2161
- 2253.315 2654.455
2008 2941
- 2790.470 2587.959
(USD mn )
EVA Calculation Pre & Figures In Cr.
Post Acquisition
Particulars 2006-07 2007 -08
Risk Free Rate 8.00% 5.27%
Market premium 6.50% 9.00%
Assumed Beta 1.12 1.5
Cost Of equity 15.28% 18.77%
Equity % 37.00% 35.00%
Cost Of Debt 8.00% 8.00%
Tax Rate 34.00% 25.00%
After tax cost of debt 5.28% 6.00%
Debt % 63.00% 65.00%
WACC 8.98% 10.4695%
Capital Employed 42074.75 92161.62
Net Profit 4165.61 12321.76
Total Weighted Cost 3778.313 9648.861
EVA 387.297 2672.9
TATA Steel before &
After… 2006-07 2007-08 2008-09
• The point is Arcelor has much superior assets, wider market reach and
financially stronger than Corus
Right Partner ??
Right Time ??
Right Terms ??
Our view on the deal
(US $
Billion)
THANK YOU