Case Study Of Tata Steel's Acquisition Of Corus

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Tata Steel’s acquisition of Corus
Abstract
Tata Steel acquired Anglo-Dutch steel-maker Corus for $12.2 billion in a deal which made it the 5th largest global steel company and India’s 2nd largest after Mittal’s Arcelor. This was the largest ever foreign takeover by an Indian company and marked the arrival of Indian corporates on the global stage. Corus, the largest steel producer in the U.S. was four times larger than Tata Steel, but in the year 2006 the operating profit for Tata was $840 million against Corus’ $860 million. Thus, due to cheaper production costs and other major inputs, Tata was generating profits compared to Corus even with a four times smaller size and capacity.
Tata purchased a 100% stake in Corus on the 2nd of April 2007 at 608 pence per share entirely in a cash deal, which was valued at $12.04 Billion. This deal made Tata Steel the 5th largest steel producer. This deal had started in 2005, when the price offered by Tata was 455 pence per share. However, the deal was made at 608 pence per share, i.e. 33.6% higher than the initial offer. This increase in Corus’s valuation was mainly due to a bidding war between Tata Steel and Brazilian steel-maker Companhia Siderurgica Nacional (CSN) who offered 475 pence per share against Tata’s 455. Out of the $12 Billion of this deal, Tata only financed $4 Billion through equity. The remaining was financed through senior term loans & high yield loans.
This deal took place because of the several apparent synergies

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