Corporate Law Project

DECLARATION
The text reported in the project is the outcome of my own efforts

and no part of this report has been copied in any unauthorized
manner and no part in it has been incorporated without due
acknowledgment.
Date:- ___________
Roll No:- 07BAL006
Course Coordinator: Dr. Kiran Rai Name &

Signature of the student
Aditya Chopra
____________________________
1|corporate law
CERTIFICATE
This is to certify that the project entitled: “mergers & acquisitions –

Tata Corus acquisition” has been carried out by Aditya Chopra
under my supervision and guidance. The project is his own original
work completed after careful research and analysis of the data,
research material available in previous works and various judicial
pronouncements. The project is of the standard expected of a
candidate for project submission in the course of
Mergers&Acquisition (2BAL707) of VII semester of B. A.L.L B.
(Hons.) Programme and commend that it be sent for evaluation
Date:-______________ Name & Signature of the Course

Co-ordinator
Dr.
Kiran Rai
____________________
2|corporate law
INDEX
CHAPTER 1
 Introduction of Topic
 Nature and Scope of
the Study
 Objectives of the
study
CHAPTER 2
 Concept of
merger/amalgamations
 Concept of
acquisitions/takeovers
 Difference between
merger & acquisition
CHAPTER 3
 TATA-CORUS
acquisition – the
biggest Indian
Acquisition
CHAPTER 4
 Conclusion &
Suggestions
BIBLIOGRAPHY
 Books
 Web References
 Case Laws
3|corporate law
Chapter – 1
4|corporate law
INTRODUCTION
My topic of project is “Mergers & Acquisition – Tata-corus”.

Researcher has proceeded with a brief introduction of merger and
acquisition and then dealt with the topic of acquisition in deep and
then the acquisition of Tata-Corus.
Basically merger means an arrangement whereby the assets of two

or more companies becomes vested in, or under the control of, one
company (which may or may not be one of the original two
companies), which has as its shareholders all, or substantially all,
the shareholders of one or both of the merging companies
exchanging there shares, it can be voluntarily or as the result of
the legal operation, for shares in the other or a third company.1
Merger is also known as amalgamation of two or more companies

which means mixing up or uniting together or one company
blending with the other company to carry on their business as a
third company.
Takeover refers to acquisition of a company by another company,

by acquiring the assets of the company or by taking over the
control of the management. It could be of a private company or a
1
Sampath K. R.(2008). Law and Procedure for Mergers/Joint Ventures Amalgmations Takeovers
& Corporate Restructure, Mumbai: Snow White Publication Pvt. Ltd.
5|corporate law
public quoted company or a private company owning or controlling
another public quoted company.
Takeover can be through three ways:
1. By agreement between the acquirer and the controllers of the

acquired company.
2. By purchase of shares on stock exchange.
3. Or by means of the takeover bid.
The largest Indian takeover of an foreign company was held on

January 31,2007 in which 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).
And after this biggest takeover 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.
Tata Steel outbid the Brazilian steelmaker Companhia Siderurgica

Nacional's (CSN) final offer of 603 pence per share by offering 608
pence per share to acquire Corus. It's a landmark deal since an
Indian company has taken over an international company three
times its size.
6|corporate law
Nature and Scope of Project
Nature: the nature of the project done is descriptive. Project covers

a descriptive study of mergers and acquisitions and then dealing in
depth with the acquisition of TATA-CORUS.
Scope: scope of the project is very wide. Researcher has taken in

consideration both the aspects i.e. merger and acquisition, dealing
them in depth and then gets to the acquisition of TATA-CORUS.
7|corporate law
Objective of Study
There are four main objectives to carry out the project work which
are as follows:
1. To understand the concept of merger and the acquisition.

2. How they both are different from each other.
3. And to understand and go through how the acquisition of
TATA-CORUS taken place. And
4. What are the steps which were followed by the TATA to
takeover CORUS.
8|corporate law
Chapter – 2
9|corporate law
Concept of Merger/amalgamations
what is amalgamation?
“Amalgamation occurs when two or more companies are joined to

form a third entity or one is absorbed into or blended with
another.”2 The new company which comes into existence enjoys all
the rights, powers, assets and capital, subject to all the duties
which formerly enjoyed by both the amalgamating companies.
In W.A. Beardsell & Co. Ltd, Re3. The Madras High Court Observed
that:
The word ‘amalgamation” has not been defined in the act. The
ordinary dictionary meaning of the expression is ‘combination’.
Judging from the context and from the marginal note of the section
394 which appears in chapter V relaying to the arbitration,
compromises, arrangements and reconstructions, the primary
object of amalgamation of one company with another is to facilitate
the reconstruction of the amalgamating companies and this is a
matter which is entirely left to the body of shareholders, (and)
essentially an affair related to the internal administration of the
2
Bank of India Ltd. v. Ahmedabad Mfg & Calico Printing Co., (1972) 42 Comp Cas 211.
Industrial Credit & Investment Corpn of India v. Financial & Management Services Ltd., AIR
1998 Bom 305.
3
(1968) 38 Comp Cas 197, 204 Mad.
Reliance Jute Industries Ltd, Re. (1983) 53 Comp Cas 591 Cal
10 | c o r p o r a t e l a w
transferor company. The decision of the body of the shareholders
not ought to be lightly interfered with.
In the absence of any specific definition in the Companies Act,

1956 one will have to look to the meaning the term in dictionary
meaning which means to consolidate, or to compound, or to
combine.
Under an “amalgamation” or “merger” two or more companies are

merged with either by the acquisition of there undertakings and
assets by one of them or bya newly incorporated company or, more
commonly, by one such company acquiring or controlling
shareholding in the other.4
In Weinberg and Blank on Takeovers and Mergers, fourth edition,

there is no definition of the term “amalgamation”. The authors
have probably used the term “merger” as similar to that of
“amalgamation.”
There are three types of amalgamations, which are if following

types:
1. Horizontal Mergers: it is a merger which involves the merger

of two or more companies which are producing essentially
the same products or services, which compete directly with
each other.
2. Vertical Mergers: it is that kind of merger in which backward
integration is possible. When the company who is delivering
the final product merges with the company who is producing
4
Gower’s, Modern Company Law, chapter 28
the parts for them, then that merger is called as the vertical
merger.
3. Conglomerate Merger: it is a merger in which two or more
companies producing different products are acquired and
merged is known as the conglomerate merger.
legal Provisions (sections under law related to

amalgamations/mergers):
the term “amalgamation” is not been defined under the Companies

Act 1956. The term is been defined under the Income-Tax Act,
1961. There are references made in relation to the
“amalgamations” in section 394, 396 & 396A of the Companies
Act.
 Section 394: discuss the amalgamation while dealing with

the powers of the National Company Law Tribunal.
 Section 396 &396A: deals with the powers of the Central
Government to amalgamate companies in public interest and
the maintenance of records by the amalgamated companies.
“Neither ‘reconstruction’ nor ‘amalgamation’ has a precise legal

meaning. Amalgamation is blending of two or more existing
undertakings into one undertaking, the shareholders of each
blending company becoming substantially the shareholders in the
company which is to carry on the blended undertakings. There
may be amalgamation either by the transfer of two or more
undertakings to a new company, or by the transfer of one or more
undertakings to an existing company. Strictly, amalgamation does
not, it seems, cover the mere acquisition by a company of the
share capital of other companies which remain in existence and
continue their undertakings, but the context in which the term is
used may show that is intended to include such as acquisition.” 5
The English Companies Act, has a specific chapter – part 27

consisting of sections 902-941 dealing with the merger and
demerger of two or more public companies. In section 904(1) of the
said act defines the word “merger.” The definition distinguish
between merger of one or more companies with an existing
company – merger by absorption and where merger involves a
merging of two or more companies with a new company – merger
by formation of new company. This definition is applicable to
public companies whether listed or not. However section 900 is
very much similar to that of the section 394 of the Companies Act
of India and provides that where an application is made to the
court for sanctioning a compromise or arrangement with the
members or creditors for the purpose of either amalgamation or
two or more companies or the whole or any part of the undertaking
or the property is to be transferred to another company, the court
has specific power to enable such a reconstruction of the company
or either.
5
The Halsbury’s Laws of England, Vol. VII(2) para 1461 page 1103
Objectives of Corporate Amalgamations:
Basically there are various reasons for corporate restructuring

through amalgamations and acquisitions but some of the main
factors or objectives are as follows:6
1. To achieve economies of scale;

2. To reduce the gestation period for new businesses which
would be complementary to the existing business of the
company;
3. To compete globally;
4. To put to the use the liquidity available with the company
for achieving growth through diversification;
5. To acquire and maximize the available managerial skill to
increase the profitability;
6. To take advantage of concession given by tax laws.
Concept of Acquisition
6
& Corporate Restructure, Mumbai: Snow White Publication Pvt. Ltd.
Basically the literal meaning of the acquisition is to acquire i.e. to
get hold on, or to attain the power, or buy or purchase something,
or we can also say takeover. So, after taking this into mind we can
make out that acquisition is to buy share of a company and
takeover that company and subsequently get the powers to control
the affairs of the company. And after acquiring the company merge
or amalgamate the acquired company or with the acquired
company and in the process also demerge some of the
undertakings.
An acquisition can be agreed or compulsory acquisition or can be a

combination of hostile takeover and consequent compulsory
acquisition pursuant to law. Acquisition could be of a private
company or a public quoted company or a private company owing
or controlling another public quoted company.
What is Acquisition?
As earlier said that acquisition is also known as takeover. Hence

we can say that Acquisition is to takeover of a company by another
company.
M. A. Weinberg. One of the pioneers in dealing the law and practice

relating to takeovers has defined takeover as:
“a transaction or series of transactions whereby a person

(individual, group of individuals, or company) acquires control over
the assets of a company, either directly by becoming the owner of
those assets or indirectly by obtaining control of the management
of the company. Where shares are closely held (i.e. by small
number of persons), a take-over be generally be effected by
agreement with the holders of the majority of the share capital of
the company being acquired.
Where the shares are held by the public generally, the take-over
maybe effected:
1. By agreement between the acquirer and the controllers of the

acquired company.
2. By purchase of shares on the stock exchange. or
3. By means of a takeover bid.
In business, takeover is purchase of one company (the target) by

another (acquirer). In UK the term refers to the acquisition of the
public company whose shares are listed on a stock exchange, in
contrast to the acquisition of a private company.
We can divide or the term acquisition/takeover into three types

i.e.7
1. Friendly takeovers:
Before a bidder makes an offer for another company, it usually

first informs that company's board of directors. If the board feels
that accepting the offer serves shareholders better than rejecting it,
it recommends the offer be accepted by the shareholders.
In a private company, because the shareholders and the board are

usually the same people or closely connected with one another,
7
http://en.wikipedia.org/wiki/Takeover
private acquisitions are usually friendly. If the shareholders agree
to sell the company, then the board is usually of the same mind or
sufficiently under the orders of the shareholders to cooperate with
the bidder. This point is not relevant to the UK concept of
takeovers, which always involve the acquisition of a public
company.
2. Hostile takeovers:
A hostile takeover allows a suitor to bypass a target company's

management unwilling to agree to a merger or takeover. A takeover
is considered "hostile" if the target company's board rejects the
offer, but the bidder continues to pursue it, or the bidder makes
the offer without informing the target company's board beforehand.
A hostile takeover can be conducted in several ways. A tender offer

can be made where the acquiring company makes a public offer at
a fixed price above the current market price. Tender offers in the
USA are regulated with the Williams Act. An acquiring company
can also engage in a proxy fight, whereby it tries to persuade
enough shareholders, usually a simple majority, to replace the
management with a new one which will approve the takeover.
Another method involves quietly purchasing enough stock on the
open market, known as a creeping tender offer, to effect a change
in management. In all of these ways, management resists the
acquisition but it is carried out anyway.
The main consequence of a bid being considered hostile is practical
rather than legal. If the board of the target cooperates, the bidder
can conduct extensive due diligence into the affairs of the target
company. It can find out exactly what it is taking on before it
makes a commitment. But a hostile bidder knows about the target
by only the information that is publicly available, and so takes a
greater risk. Also, banks are less willing to back hostile bids with
the loans that are usually needed to finance the takeover. However,
some investors may proceed with hostile takeovers because they
are aware of mismanagement by the board and are trying to force
the issue into public and potentially legal scrutiny.
3. Reverse takeovers:
A reverse takeover is a type of takeover where a private company

acquires a public company. This is usually done at the instigation
of the larger, private company, the purpose being for the private
company to effectively float itself while avoiding some of the
expense and time involved in a conventional IPO. However, under
Alternative Investment Market (AIM) rules, a reverse take-over is
an acquisition or acquisitions in a twelve month period which for
an AIM company would:
 exceed 100% in any of the class tests; or

 result in a fundamental change in its business, board or
voting control; or
 in the case of an investing company, depart substantially
from the investing strategy stated in its admission document
or, where no admission document was produced on
admission, depart substantially from the investing strategy
stated in its pre-admission announcement or, depart
substantially from the investing strategy
How takeover goes: a flow chart:8
Take-over saga begins
8
P. Mohana Rao (editor), Mergers and Acquisitions of Companies (2000), New Delhi: Deep &
Deep Publications Pvt. Ltd.
Appoints Merchant
Banker who Take-over process
administers take-over
process
File with SEBI &

Public announcements
Stock Exchange
Cash with bank –

Deposit escrow amount in the form of bank gurantee
security
English & Hindi

Publication of public announcement in newspapers
National daily
regional language
Letter of offer File with SEBi send

to Target Company,
Stock Exchange and
Shareholders
Offer to Offer to Payment of

open close consideration
Legal Provision Related to Takeover:
Indian law:
The subject of takeover is been dealt in both The Companies Act,

1956 (CA 1956) and The Securities & Exchange Board of India
(Substantial Acquisition of Shares and Takeover) Regulation, 1997
(SEBI Takeover Code).
The CA Act deals with the power of the company to acquire shares
of another company generally (section 372A), and specifically in
relation to acquiring shares from persons who did not sell or have
not agreed to sell shares held by them, notwithstanding approval
of the scheme or contract for acquisition of shares, by
shareholders owning 90% and over of the shares (section 395). The
company being acquired could be either a public quoted company
or a private limited company.
The takeover of the listed company is regulated by clauses 40A and

40B of the listing agreement. This clause in listing agreement
seeks to regulate takeover activities independently and impose
certain requirements of disclosure and transparency. 9
Clause 40A deals with substantial acquisition of shares and

requires the offeror and the offeree to inform the stock exchange
when such acquisition results in an increase in the shareholding of
the acquirer to more than 10%.
Clause 40B deals with takeover offers. A takeover offer refers to

change in management. Where there is no change in management,
clause 40B of listing agreement will not apply.
The SEBI rules could deal with the law relating to substantial
acquisition of shares or control of a public quoted company (listed
9
Gurminder Kaur, Corporate Mergers and Acquisition (2005), New Delhi: Deep & Deep
Publications Pvt. Ltd.
company) or an unquoted public limited company (unlisted
company) including a foreign registered company, which owns or
control the listed company.
City Code of UK:
The takeover regulation in India is a statutory regulation. As

against this in the UK the takeover regulation is in the form of a
City Code, which is not a statutory regulation. Since the initial
code was formed in 1959 by a working part in City of London, it
has come a long away, but still regulates the takeover and merger
of the companies. The City Code being a code has the flexibility to
modify its rule to achieve the result – ensure fair and equal
treatment of all shareholders in relation to takeovers and provision
of an orderly framework within which takeovers are conducted.
The financial service authority i.e. FSA which is established to

ensure market confidence, public awareness and protection of
consumers; act as a statutory body and gives support to the code.
And at the request of the takeover panel, the FSA may take
enforcement action against the persons contravening the Takeover
Code.
USA Regulations:
US takeover law is influenced by a mixture of federal and state

laws. The Securities and Exchange Act, 1934 and the rules made
there under provide for strict disclosures and further provide for
making mandatory tender offer in the event of acquisition of shares
beyond certain prescribed limit. The takeover laws in USA are
statutory regulations.
Advantages and Disadvantages of Takeover/Acquisition
While perceived advantages and disadvantages of a takeover differ

from case to case, there are a few worth mentioning.
Advantages:
1. Increase in sales/revenues (e.g. Procter & Gamble takeover

of Gillette)
2. Venture into new businesses and markets
3. Profitability of target company
4. Increase market share
5. Decrease competition (from the perspective of the acquiring

company)
6. Reduction of overcapacity in the industry
7. Enlarge brand portfolio (e.g. L'Oréal's takeover of Bodyshop)
8. Increase in economies of scale
9. Increased efficiency as a result of corporate

synergies/redundancies (jobs with overlapping
responsibilities can be eliminated, decreasing operating
costs)
Disadvantages:
1. Reduced competition and choice for consumers in oligopoly

markets. (Bad for consumers, although this is good for the
companies involved in the takeover)
2. Likelihood of job cuts.
3. Cultural integration/conflict with new management
4. Hidden liabilities of target entity.
5. The monetary cost to the company.
Takeovers also tend to substitute debt for equity. In a sense,

government tax policy of allowing for deduction of interest
expenses but not of dividends has essentially provided a
substantial subsidy to takeovers. It can punish more conservative
or prudent management that don't allow their companies to
leverage themselves into a high risk position. High leverage will
lead to high profits if circumstances go well, but can lead to
catastrophic failure if circumstances do not go favorably. This can
create substantial negative externalities for governments,
employees, suppliers and other stakeholders when the Black Swan
appears and the "fit hits the shan".10
10
http://en.wikipedia.org/wiki/Takeover
Acquisition of Shares by a Company of another Company:
Power of a company to invest in shares of another company is

generally governed by its memorandum and is further subject to
certain restrictions placed by the CA. section 372 as it stood prior
to amendment by the companies (amendment) act, 1988,
prohibited intercorporate investments in shares in excess of 10% of
the subscribes capital of the company whose shares are being
purchased or subscribes and subject to an overall limit in respect
of investment in all bodies corporate of 30% of the subscribes
capital of the investing company. Investment could be made in
excess to these limits, if the investment is approved by the
shareholders by a resolution and further approved by the central
government.
However by the Companies (amendment) Act, 1999, the existing

provisions of section 372 were made inoperative effective from 31 st
October, 1998 and instead a new provision section 372A
introduced.
Presently, the powers of investment in shares together with loans

granted or issued by a company have been very much relaxed. No
separate limit is been provided for shares, loans and guarantees is
provided. But the company could exceed this limit if special
resolution of the shareholders is obtained.
This section covers both direct as well as indirect investments.

Though the provisions of section 369 (intercorporate loan) has
been deleted the new section 372A covers both investment in
shares and as well as also grant of loans and issue of guarantees.
The term loan has been defined to include debentures and any
deposit of money, other than deposit of money, other than deposit
in a banking company.11
In considering takeovers, the board of directors of a company will

need to comly with these provisions in addition to the provisions of
SEBI Takeover Code and other law or regulations
11
& Corporate Restructure, Mumbai: Snow White Publication Pvt. Ltd
Difference between Merger and Acquisition: 12
Although the terms merger and acquisition are often used as

though they are synonymous, they mean different things. The
differences between a merger and acquisition are important to
value, negotiate, and structure a client's transaction. Mergers and
acquisitions both involve one or multiple companies purchasing all
or part of another company. The main distinction between a
merger and an acquisition is how they are financed.
A merger happens when two firms; often of about the same size,
agree to move forward and exist as a single new company rather
than remain separately owned and operated. This kind of action is
more specifically referred to as a "merger of equals." Mergers are
often financed by a stock swap, in which the stock owners in both
companies receive an equivalent quantity of stock in the new
company. The stocks of both companies are surrendered and new
company stock is issued in its place. On the other hand, when one
company takes over another company and clearly establishes itself
as the new owner, the purchase is called an acquisition. Legally,
the target company ceases to exist, the buyer swallows the
business and the buyer's stock continues to be traded. Acquisition
refers to two unequal companies becoming one and the financing
can involve a cash and debt combination, all cash, stocks, or other
equity of the company.
12
http://en.wikipedia.org/wiki/Mergers_and_acquisitions
A purchase deal will be called a merger when the CEOs of both the
companies agree that joining together is in the best interest of both
of their companies. When the deal is unfriendly - that is, when the
target company does not want to be purchased, it is regarded as
an acquisition.
Whether a purchase is considered a merger or an acquisition, in

reality depends on whether the purchase is friendly or hostile and
how it is announced. In other words, the actual difference lies in
how the purchase is communicated to and received by the target
company's board of directors, shareholders, and employees.
Chapter – 3
TATA-CORUS Acquistion – Biggest Indian Acquisition:
A brief about the two companies:
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).
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. Profits were £580 million
before tax and £451 million after tax.
A war between two giants (TATA Steel and Brazilian steel
maker Companhia Siderúrgica Nacional i.e. CSN) to but
another giant:
There was a heavy speculation surrounding Tata Steel's proposed

takeover of Corus ever since Ratan Tata had met Leng in Dubai, in
July 2006. On October 17, 2006, Tata Steel made an offer of 455
pence a share in cash valuing the acquisition deal at US$ 7.6
billion. Corus responded positively to the offer on October 20,
2006.
In November 2006, Brazilian steel maker Companhia Siderúrgica

Nacional (CSN) challenged Tata Steel's proposal for acquisition.
They countered Tata Steel's offer of 455 pence per share by offering
475 pence per share of Corus.
In the light of CSN offer Corus announced that it would defer its
extraordinary meeting of shareholders to December 20, 2006 from
December 4, 2006 in order to allow counter offers from TATA steel
and CSN.ABN Amro and Deutsche Bank are backing Tata Steel,
while CSN's advisors are Goldman Sachs, UBS and Barclays
Capital.
Tata Steel Ltd. of India bid top bid to acquire Corus Group PLC of
the United Kingdom at 6.2 billion Pounds ($12.1 billion). In the
auction, Companhia Siderurgica Nacional last bid was 603 Pence
($11.82billion) per share, while Tata Steel Ltd. final bid was 608
Pence per share, 5 Pence higher.
Finally, on January 31, 2007 TATA Steel acquired the Corus at 6.2
billion pounds ($12.1 billion) in counter to that of $11.82 by CSN
and become the fifth largest producer of steel in the world and
second largest in the Europe.
Final outlook of the TATA-CORUS Acquisition:
This acquisition was the biggest overseas acquisition by any Indian

company. TATA Steel emerged as the Fifth largest producer of steel
in the world and Second largest in Europe. This acquisition in turn
provide TATA Steel Corus strong distribution 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. Analysts asked whether
the deal would really bring any substantial benefits to Tata Steel.
Moreover, since the acquisition was done through an all cash deal,
analysts said that the acquisition would be a financial burden for
Tata Steel.
"The financials for this deal [require] high performance levels,
perfect post-deal execution and sustained high steel prices. It is a
risky game and will be okay for Tata as long as the economy is
growing and no major bumps occur. If [these bumps] do occur,
they can become a challenge, and I am reminded of the high
leverage days of the mid-1980s."13
"Indian steel companies are on a consolidation mode. The Tata-

Corus deal has set many records. So far, the only $1 billion-plus
deal was done by ONGC, and it's the first milestone for India Inc,
with the Tata deal crossing $10 billion mark. It's a landmark deal
since an Indian company has taken over an international company
three times its size.”14
Post Acquisition Tata
Tata Steel has formed a seven-member integration committee to

spearhead its union with Corus group. While Ratan Tata,
chairman of the Tata group, heads the committee, three of the
members are from Tata Steel and the other three are from Corus
group. Members of the integration committee from Tata Steel
include managing director B Muthuraman, deputy managing
director (steel) T Mukherjee, and chief financial officer Kaushik
Chatterjee. The Corus group is represented in the committee by
CEO Phillipe Varin, executive director (finance) David Lloyd, and
division director (strip products) Rauke Henstra.
13
Vivek Gupta, Managing Director, AT Kearney (India), in February 2007
14
S. Mukherji, Managing Director, ICICI Securities, in February 2007
The acquisition by Tata amounted to a total of 608 pence per
ordinary share or ₤6.2 billion (US $12 billion) which was paid in
cash. First of all, the general assumption is that the acquisition
was not cheap for Tata. The price that they paid represents a very
high 49% premium over the closing mid market share price of
Corus on 4 October, 2006 and a premium of over 68% over the
average closing market share price over the twelve month period.
Moreover, since the deal was paid for in cash automatically makes
it more expensive, implying a cash outflow from Tata Steel in the
amount of £1.84 billion.
Tata has reportedly financed only $4 billion of the Corus purchase

from internal company resources, meaning that more than two-
thirds of the deal has had to be financed through loans from major
banks. The day after the acquisition was officially announced, Tata
Steel’s share fell by 10.7 percent on the Bombay stock market.
Despite its four times smaller size and smaller capacity, Tata
Steel’s operating profit for 2006, earning $840 million on sales of
5.3 million tones, were very close in amount to those generated by
Corus ($860 million in profits on sales of 18.6 million tons).
Chapter – 4
Conclusion
Steel prices, raw material supplies and interest costs on the $8-
billion debt that is being raised to fund the deal. Soon he may also
have to deal with the sensitive issue of possible job There is no
doubt that Tata has pulled off a coup — Corus makes nearly four
times more steel than Tata Steel. Together, the combine becomes
the fifth largest producer in the world and the second in Europe.
But to make the most of the deal, Tata has to manage several
variables including cuts in Corus’s manufacturing plants. There
are also the usual sets of integration challenges that come with
such large buyouts. The deal may be done, but the hard work is
just beginning.
In the run up to the auction, Tata had maintained a low profile

despite CSN’s aggressive stance. “They underestimated our
firepower,” says Gandhi, who admits that even bankers to the
transaction — ABN Amro and Deutsche Bank — were in the dark
as to how far Ratan Tata was willing to go.
The only blip, though, was the way the stock markets reacted. Tata
Steel has lost a billion dollars in market capitalization since it first
announced its intention to buy Corus in October last year. (The
BSE Sensex rose 18 per cent during the same period.) The market
perception is that the Tata Group paid too much for this
acquisition. Several brokerage houses have pointed out that the
deal implies a high enterprise value/ earnings before interest,
taxes, depreciation and amortization (EV/EBITDA) multiple of 9 for
Corus versus 4.6 for Tata Steel. (L.N. Mittal paid 5.8 times EBITDA
for Arcelor.) Ratan Tata disagrees: “We believe that, looking back in
time, the price today will prove to be one that was worthwhile
because the price of steel companies is likely to be even higher in
the coming year.”
But tying up the funding is the immediate priority. The Corus

acquisition is being routed through a special purpose vehicle (SPV)
called Tata Steel, UK. (A similar structure was used for the Tetley
buy in 2000.) So far, the Tatas have indicated that group holding
company Tata Sons will pump in $4.1 billion as equity into the
SPV. The balance $8 billion will be raised by junk bonds and
senior term loans (part of it has been tied up with banks like ABN
Amro, Deutsche Bank and CSFB). These loans will be serviced out
of Corus’s profits; Tata Steel need not repay this. This has
effectively ring-fenced Tata Steel shareholders.
Few will disagree. The Tata Steel managing director is likely to look
for more acquisitions as he aims to increase the company’s total
capacity to 100 mt by 2015. To reach that destination, a lot will
depend on whether the group can make Corus fly. And it may be
more challenging for Mr Tata than flying the F1615.
15
by Pallavi Roy and Mobis Philipose, Making Corus Work, Business Today
Bibliography
Books:
 Avtar Singh, Company Law (15 th edition 2007), Eastern Book

Company.
 Gurminder Kaur, Corporate Mergers and Acquisitions
(2005), Deep & Deep Publication Pvt. Ltd.
 Gower, The Principal of Modern Company Law, (4th edition)
 P. Mohana Rao (editor), Mergers and Acquisitions of
Companies (2000), Deep & Deep Publication Pvt. Ltd.
Web Reference:
 www.wikipedia.org
 www.legalserviceindia.com
 www.manupatra.com
Cases:
 Bank of India Ltd. v. Ahmedabad Mfg & Calico Printing Co.,

(1972) 42 Comp Cas 211.
 Industrial Credit & Investment Corpn of India v. Financial &
Management Services Ltd., AIR 1998 Bom 305
 W.A. Beardsell & Co. Ltd, Re(1968) 38 Comp Cas 197, 204
Mad.
 Reliance Jute Industries Ltd, Re. (1983) 53 Comp Cas 591
Cal
Magazines:
 Pallavi Roy and Mobis Philipose, Making Corus Work,
Business Today

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DECLARATION

The text reported in the project is the outcome of my own efforts

Roll No:- 07BAL006

Course Coordinator: Dr. Kiran Rai Name &

This is to certify that the project entitled: “mergers & acquisitions –

Date:-______________ Name & Signature of the Course

My topic of project is “Mergers & Acquisition – Tata-corus”.

Basically merger means an arrangement whereby the assets of two

Merger is also known as amalgamation of two or more companies

Takeover refers to acquisition of a company by another company,

Takeover can be through three ways:

1. By agreement between the acquirer and the controllers of the

The largest Indian takeover of an foreign company was held on

And after this biggest takeover by an Indian company, Tata Steel

Tata Steel outbid the Brazilian steelmaker Companhia Siderurgica

Nature: the nature of the project done is descriptive. Project covers

Scope: scope of the project is very wide. Researcher has taken in

1. To understand the concept of merger and the acquisition.

“Amalgamation occurs when two or more companies are joined to

In the absence of any specific definition in the Companies Act,

Under an “amalgamation” or “merger” two or more companies are

In Weinberg and Blank on Takeovers and Mergers, fourth edition,

There are three types of amalgamations, which are if following

1. Horizontal Mergers: it is a merger which involves the merger

legal Provisions (sections under law related to

the term “amalgamation” is not been defined under the Companies

 Section 394: discuss the amalgamation while dealing with

“Neither ‘reconstruction’ nor ‘amalgamation’ has a precise legal

The English Companies Act, has a specific chapter – part 27

Basically there are various reasons for corporate restructuring

1. To achieve economies of scale;

An acquisition can be agreed or compulsory acquisition or can be a

As earlier said that acquisition is also known as takeover. Hence

M. A. Weinberg. One of the pioneers in dealing the law and practice

“a transaction or series of transactions whereby a person

1. By agreement between the acquirer and the controllers of the

In business, takeover is purchase of one company (the target) by

We can divide or the term acquisition/takeover into three types

Before a bidder makes an offer for another company, it usually

In a private company, because the shareholders and the board are

A hostile takeover allows a suitor to bypass a target company's

A hostile takeover can be conducted in several ways. A tender offer

A reverse takeover is a type of takeover where a private company

 exceed 100% in any of the class tests; or

How takeover goes: a flow chart:8

Take-over saga begins

File with SEBI &

Cash with bank –

English & Hindi

Letter of offer File with SEBi send

Offer to Offer to Payment of

Legal Provision Related to Takeover:

The subject of takeover is been dealt in both The Companies Act,

The takeover of the listed company is regulated by clauses 40A and

Clause 40A deals with substantial acquisition of shares and

Clause 40B deals with takeover offers. A takeover offer refers to

City Code of UK:

The takeover regulation in India is a statutory regulation. As

The financial service authority i.e. FSA which is established to

US takeover law is influenced by a mixture of federal and state

Advantages and Disadvantages of Takeover/Acquisition

While perceived advantages and disadvantages of a takeover differ

1. Increase in sales/revenues (e.g. Procter & Gamble takeover