GASE STUDY

TATA STEEL ACQUISITION OF CORUS

Dutch steel producer Corus Group Plc on

When Tata Steel of India acquired Anglo
Janudly 31, 2007 iíor US$ 12.11
billion (¬8.5 billion), it defied the prevalent business
Tata
the smalier íish. This is because of the fact that
logic thai only a big fislh can eat to Corus. In history, this is the
Stee! was relatively a much smaller player as compared
an Indian and the second largest in the industry
biggest loreign takeover by company
Arcelor. The two parties had agreed at
after Mittal Steel's $38.3 billion acquisition oí
share of Corus. With this merger, Tata Steel became
the fifth
a vaue of 455 pence per
both happy with the merger
largeststeel manulacturer in the world. Tata and Corus are
reap many beneiits from this
deal.
and Tata steel is likely to

TATA
IAA IEt

Muthuraman (left) with Chairman of

Tata Sons Ratan
Managing Director of Tata Steel B.
Executive Phillippe Varin after
Chairman Jim leng and Chief
N. Tata, and Corus Group
Tata's takeover of the Corus Group
and
Corus was tormed by a Hoogovens, a Dutch group
nerger of
Earlier in 1999, 10 steel producing
British Steel. Before merger with Tata
Steel, Corus was one of the top
did
of European market. Yet, it
of the world with about 14 per cen! controi
ompanies had the best modern
foothold in emerging markets like lndia and China. Iht
not have a
for global competitiveness
which were the pume necessity
steel making technologies,
of Tata Steel. Corus hold in premium sectors, like construction, automotive,
aero-space,
etc., were also attractive sectors for Tata Steel. In past, Tata Steel had acquired NatSteel
and Millennium Steel for a similar reason.

A Few important Acquisitions by Tata Steel

Company Acquired by Tata Sieel Investment Capacity
NatSteel Asia: Dominant steel $486.4 million 2 million tons
producer of Singapore and owns
steel mills ir China, Thailand,
Vietnam, the Philippines and
Australia
Millennium Steei: Thailand's $ 400 million, inclusive of 1.7 million tons
largest steel maker was formed about $225 million debt
through merger of three operat- Millennium owes
a

ing companies, the Siam lron and

|Steei Company, The Siam Con-
struction Steel Company and NTS
Steel Group in 2002
Corus: Anglo Dutch steel pro- $12.15 billion 18 million tons
| ducer was formed by a mergcr of
Hoogovens, a Dutch group and
British Steel

How would Corus

acquisition help Tata Steel
list the following reasons for discussion technologically and business-wise? We
purpose
) Assuming about 8 per cent of GDP growth of Indian, there is
going to be huge
requirement of steel and so the loca! Indian players in this sector see
ahead. Tata Steel produced about 5 million tonnes of steel a
bright future
in the financial
ending March 2006. It has a projected production target of 30 million year
tones for
2015. This is not
possible without a merger and acquisition.
ii) Corus could provide a wide
portfolio of products that can help Tata Steel in
strategically taking leadership role in India. Tata Steel's large coal and iron
a
feed from Orissa and ore
of Corus. In the new
Jharkhand in India can help the not so
healthy cost strueture
entity after merger, the early part of the premium steel's value
chain can be
supported in India during raw material and
then adding more value in semifinished stage and
his deal was lor "the Furope. According to Jim Leng the Chaiman of
Corus,
right partner at the right time at the right price and
ight terms." on the
(ii) Strong R&D strength of Corus is
exactly what Tata Steel needed at thal
time. For
example,
Corus had the technology for
HybrelTM, plating strip steel, which has
a
the property of both metal and
particles.
pickled and oiled steel called Ymagine,Similarly,
it had technology of
light gauged,
which is now used in automotive and
Construction industry. For the Tata Steel's Chairman Ratan Tata it
moment."
was a
'defining
(iv) For the modernisation of its steel
plant in India, Tata steel saw a lot of possibilities
of R&D support from Corus. The new
entity after Tata-Corus merger is expected to
provide an estimated $400 million worth of savings to Tata Steel in three years time.
The estimated savings till March 2008 was
130 million dollars. A prime reason for
such high volumes of savings is the
this acquisition.
availability of cost saving technology through
(v) Breakthrough technology development takes time. Many times, it is better that
these are acquired rather than developed in-house. Tata Steel did exactly the same.
According to Mr. B. Muthuraman, managing director of Tat Steei, a
technology had been developed by Corus that can reduce the cost ofbreakthrough
production
of steel. Through the acquisitioni, Tata Steel now has
access to this
would be using it for cost-cutting technology and
practises. This acquisition would also help Tata
Steel to tap the increasing demand for steel.