The Corger Story Of Jsw Steel And JSW Ispat

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Executive Summary This report throws light on the merger story of JSW Steel and JSW Ispat. The deal was much talked about as it catapulted JSW Steel to the number one position in the steel-making industry in India and because of the fact that JSW Ispat was a loss making company with high debt on its books. This report delves into the strategic benefits of the merger despite negative market sentiments and the dilutive nature of the deal. In the face of lift of ban on iron ore mining in Karnataka, this deal does not seem to be particularly attractive, but the cost synergies and tax benefits somewhat made it worthwhile. With anticipated synergies, the deal was found out to be dilutive by 7%, and the minimum dilution with any share exchange ratio was found to be 2%. Through valuation of the two companies pre-merger, this study also intends to determine the minimum level of synergies that would be required to make the deal accretive. Contents Executive Summary 2 Introduction 4 Company profiles 4 Timeline of events 5 Deal Structure 5 Why is the deal interesting? 6 Strategic Rationale behind the deal 6 Deal Valuation 7 Conclusion 8 References 9 Appendix 10 Introduction In December 2010, JSW Steel Industries became the largest shareholder in Ispat industries (now JSW Ispat) by investing Rs 2157 cr. The two companies (JSW Steel and JSW Ispat) have continually cemented their alliance. In July 2012, JSW Steel announced its plans of acquiring JSW Ispat. The merger was

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