MERGER OF TWO COMPANIES FOM SAME INDUSTRY

Submitted in partial fulfillment of the requirement for the award of

MASTER OF BUSINESS ADMINISTRATION

From
NARAYANA BUSINESS SCHOOL, AHMEDABAD

Subject : CORPORATE RESTRUCTUING AND VALUATION

Component : CEC

Submitted By
NAME : Chaitanya kishor Harne
BATCH : MBA 2022-24
ROLL NO : 010
SECTION : Sigma
DATE OF SUBMISSION: 15th april 2024
Under The Guidance Of
NAME : Mansi Bhaumik Joshi
DESIGNATION : Assistant Professor
 INDEX

• INTRODUCTION (TATA STEEL)

• BUSINESS HIGHLIGHTS

• HISTORY

• IMNTRODUCTION (CORUS)

• HISTORY

• PROCESS OF ACQUISITION

• REASONS FOR ACQUISITION BY TATA STEEL

• REASONS FOR CORUS TO BE SOLD

• WHAT WENT WRONG WITH THE DEAL? (REASON)

• POSITION BEFORE / AFTER MERGER & ACQUISION

WITH CORUS STEEL

• CONCLUSION
 BUSINESS HIGHLIGHT

MERGER & ACQUISITION OF

TATA STEEL
& CORUS STEEL
 TATA STEEL

Headquarter : Mumbai, Maharashtra

Founders : Jamsetji Tata

Founded : 1907

Parent Organization : Tata Group

Number of Employees 32,364 (2021)

 INTRODUCTION

Established in Jamshedpur (Jharkhand, India) in 1907, the Company took shape from the vision of its founder
Jamsetji Nusserwanji Tata and is today one of the world's most geographically diversified steel producers
with operations and commercial presence across the world. Tata Steel group is spread across five continents
with an employee base of over 65,000.

Focussing on Innovation, Technology, Sustainability & People, the Company strives to be the global steel
industry benchmark for value creation and corporate citizenship and become the most respected and valuable
steel company globally.

Tata Steel’s manufacturing and downstream facilities are in India, the UK, the Netherlands, and Thailand,
while its raw material mines are in India and Canada.

Tata Steel’s consolidated crude steel production capacity in India stands at 20.6 MnTPA with manufacturing
facilities in Jamshedpur and Gamharia in Jharkhand, Kalinganagar and Meramandali in Odisha. In addition,
the Company has several downstream product extensions with manufacturing facilities for Wires, Tubes,
Bearings, Agriculture Equipment, and Industrial By-products. It also has a Ferro Alloys and Minerals division
and a heavy-duty engineering and fabrication unit, Tata Growth Shop.

In India, Tata Steel operates an end-to-end value chain that extends from mining to finished steel goods,
catering to an array of market segments such as automotive, construction, general engineering etc. The
Company sources most of the required raw materials from its captive mines in India, providing raw material
security and the competitive advantage of being a low-cost steel producer. The Raw Material Division of Tata
Steel supplies almost 100% of iron ore and nearly 21% of clean coal requirements for steel manufacturing
facilities in India, while the rest is imported. The Company also operates manganese and chromite mines.
In Europe, Tata Steel is one of the largest steel producers, with two operating steel manufacturing facilities –
one based in the UK with a capacity of 5 MnTPA and the other in Mainland Europe (the Netherlands) with a
capacity of 7 MnTPA. Both operating facilities produce premium flat steel products and services for
customers in Europe and around the world. Tata Steel (Thailand) Public Company Limited (TSTH), the
Company’s South-East Asian operating unit, has a crude steel production capacity of 1.7 MnTPA.

Tata Steel delivered superior performance in FY 2021-22 despite heightened complexities in the face of
COVID-19 as well as ongoing geopolitical tensions. The Company’s India business showed broad-based
growth across chosen segments due to sustained focus on customer relationships, distribution network and
portfolio of brands supported by an agile business model. The Europe operations delivered robust
performance on the back of a strong business environment and the transformation programme undertaken by
the Company
 HIGHLIGHTS

• During FY 2021-22, the Company achieved the highest ever consolidated EBITDA of ₹63,830 crore,

a growth of 107%, translating into an EBITDA per tonne of ₹21,626 and a healthy EBITDA margin of

26%

• Capacity expansion at Tata Steel Kalinganagar (‘TSK’) Phase 2 (3 MnTPA to 8 MnTPA) is underway

with a target of commissioning key facilities: Pellet Plant and part of Cold Rolling Mill in FY 2022-23

• Completed the Amalgamation of Bamnipal Steel Limited and Tata Steel BSL Limited into and with

Tata Steel Limited

• Completed the acquisition of Neelachal Ispat Nigam Limited in the second quarter of FY 2022-23

• Successfully divested its stake in NatSteel Holdings Pte Limited, Singapore

• In Europe, Tata Steel achieved a complete separation of its UK and Netherlands operations in October

2021. Under the new structure, Tata Steel UK and Tata Steel Netherlands will operate as two

independent companies pursuing separate strategic paths

• Made progress in the New Materials Business, with an objective to build its business in knowledge

and intellectual property intensive and non-cyclical new materials. The Company is exploring

Composites, Graphene and Advanced Ceramics as areas of growth. During FY 2021-22, the Company

has started working towards building a world-class facility to produce medical materials with a focus

on healthcare

• Committed to circular economy, the Company commissioned a 0.5 MnTPA steel recycling plant at

Rohtak, Haryana. This endeavour will help meet the growing demand for steel in a sustainable
 manner, formalise the scrap market in India, and enable the country transition into a scrap-based

steelmaking route

• The Company’s latest integrated brand campaign ‘#WeAlsoMakeTomorrow’, emblematic of the steel

maker’s commitment to build a greener and better tomorrow, is currently live.

 History

More than a century ago, the visionary founder of Tata Steel, Sir Jamsetji Nusserwanji Tata, was much
impressed when he saw in America, Europe and Japan the prosperity that was created by the application of
science to industry. He therefore instilled in the fledgling Tata Steel the scientific approaches to test and
characterise raw materials and products.

By 1937 his vision took grand shape by the establishment of this Research & Control building that today still
houses these functions, presently called R&D, Scientific Services and Refractory Technology Group (RDSS
Division).

This new Division in Tata Steel also meant the very start of Industrial R&D in all of India. It is a tell-tale sign
of the vision and enlightenment of the House of Tata to set up such a ‘western’ concept in the then remote
township of Sakchi.

During the years the Division has evolved and grown to meet the needs of the company. While initially the
focus was on process monitoring and control, the 1940s saw a growing need for product development
imposed on the company by the Second World War. Process innovation was earlier limited to making the best
of local raw materials, but in the 1960s and 70s it started branching out into new process technologies to help
compete with the fast growing public sector steel industry.

The economic liberalisation of the 1980s and 90s opened India to global competition. This spurred demand
for more varieties of steel and R&D turned its attention to product development to meet the demands from
sectors like automobiles, construction and engineered products.
Since 2000 the global growth in the steel industry has escalated the market prices of raw materials like ore
and coal. This has forced R&D’s attention to process innovations to make use low cost raw materials and
increase energy efficiency. Growing awareness on environmental issues and global warming is also driving
R&D to look at reducing our environmental footprint.

The achievements and significance of this R&D have been lauded at national and international level. It was
recognised with many awards, such as various awards for the ‘R&D efforts in Industry’ by the Department of
Science and Technology (1990, 2001, 2007), the best R&D laboratory in India award by NACE International
(2004) and the award for the highest number granted patents amongst Indian owned private companies by the
Ministry of Commerce & Industry (2011).

The following are some important milestones in the history of the R&D and SS Division:

1937 : ‘Research and Control Laboratory’ opened on September 14 at its present location

1941-42 : R&D division played a key role in developing steel plates used to make armored vehicles (called
Tatanagars) in the First World War; also developed corrosion resistance steel for the Howrah bridge in
Kolkata, India

1955 : R&D division played a significant role in achieving the target of the Two Million Tonne Programme
launched at Tata Steel, Jamshedpur

1980-81 : Phase I of Modernization – Relevant technologies were absorbed by R&D

1984-88 : Phase II of Modernization – R&D identified specific coal blends for coke making
1989-94 : Phase III of Modernization – R&D optimized process parameters for Slab caster, ‘G’ Blast Furnace,
LD – 2 and HSM

1996 : RH-Degasser was commissioned and R&D played a significant role in optimization through
simulation and modeling work

1997 : R&D received the ISO 9000:1994 certification

1998 : Development and release of IF-Nb and IF-Ti grades of steel for the auto industry for the first time in
India

1999 : Established the characteristics of imported low volatile semi-soft coal for use in coke making and Blast
Furnace injection

2000 : Development and introduction of dent-resistant grade steel for the auto industry for the first time in
India. Phase IV of Modernization – Cold Rolling Mill was commissioned and R&D supported the
optimization the pickling, cold rolling, annealing and galvanizing processes

2001-02 : QMS was upgraded and R&D received the ISO 9001:2000 certification. R&D introduced an offline
simulator for predicting properties of Hot Rolled Coils

2002-03 : State-of-the-art water model laboratory was set up. Three new types of steel were developed
2003-04 : Quality Management System was computerized and strengthened. Five new products were
developed

2004-05 : Two new hot rolled products were developed

2005-06 : Three new products were developed along with several processes resulting in the filing of several
patents. Research efforts were directed towards several ambitious projects known as Thrust Area Projects

2006-07 : Considerable progress was made in the Thrust Area Projects. R&D added XRD, SEM and
beneficiation facilities to its list of research facilities

2007-08 : R&D celebrated its 70th year by organizing four international conferences. Research was initiated
in a new area of ‘energy efficient fluids’. A new wire product with thin organic coating on galvanized wire
was developed and commercialized. New software to provide set-up guidance to operators of wire drawing
lines was developed

2008-09 : R&D became part of the Global Research Development & Technology function of the Tata Steel
group

2009-10 : QMS was further upgraded and R&D received the ISO 9001:2008 certification

2010-11 : R&D augmented it computational capability by commissioning ‘Reynolds’ - the fastest computer in
the Tata Steel group. A state-of-the-art Bio-Remediation laboratory was set up
 REVENUE OF TATA STEEL

Tata Steel was Asia’s first steel company, established in 1907. Although the company is based in Jamshedpur,
Jharkhand's headquarters is in Mumbai. Tata Steel Limited was formerly known as Tata Iron and Steel
Company Limited (TISCO). The company provides the best steel in India.
With an annual crude steel capacity of more than 30 million tonnes per annum, the company ranks second as
the largest producer in Europe. A unit of the Tata group, Tata Steel Limited reduced its competition in the
market by acquiring Bhushan Steel Limited in 2018-19 and also acquired Usha Martin Ltd.

TARGET AND PROJECTION

Tata Steel has two steel manufacturing facilities in India, at Jamshedpur (TSJ) and Kalinganagar (TSK). The
Jamshedpur plant has been operating for more than 100 years, while the Kalinganagar plant began operating
in May 2016. The company currently has a capacity of 13 Metric Tonne Per Annum (MTPA) (10 TSJ+3 TSK)
and plans to scale production by 17 MTPA to 30 MTPA by 2025.

The acquisitions of Bhushan Steel and Usha Martin in 2019, are set to contribute 5.6 MTPA and 1 MTPA
respectively. The expansion currently underway at TSK will increase existing capacity from 3 MTPA to 8
MTPA. Additionally, Tata Steel has targeted organic growth of 5-6 MTPA.
 CORUS STEEL

Corus Group, international steel and metals manufacturer founded in October 1999 through the merger of
British Steel of the United Kingdom and Koninklijke Hoogovens of the Netherlands. It is based in London
and operates plants in the Netherlands and the United Kingdom in addition to the United States, Germany,
Norway, and France. Corus employs a global workforce of nearly 50,000 in the manufacture and distribution
of metals used in a variety of applications including construction, aircraft, consumer appliances, packaging,
and industrial equipment. It also provides technical support in design and engineering. In April 2007 Corus
was acquired by Tata Steel of India. (See Tata family.)
 INTRODUCTION

British Steel plc was a large British steel producer, consisting of the assets of former private companies which
had been nationalised on 28 July 1967 by the Labour Party government of Harold Wilson. On 5 December
1988 the company was privatised as a result of the British Steel Act 1988. The Koninklijke Hoogovens (lit.
Royal Blast furnaces) was a Royal Dutch steel and aluminium producer founded in 1918, located in
IJmuiden, Netherlands. The plant is now called Tata Steel IJmuiden.

In October 1999, British Steel merged with Koninklijke Hoogovens to form Corus Group plc. At formation
the steel company was the largest in Europe and the third largest worldwide.The French steel company
Sogerail, specialising in rail manufacture, was acquired in 1999 shortly before the merger of BSC for £83
million.

In 2001 Corus announced it was to cut 6,050 jobs between 2001 and 2003.

In 2003 Corus became the sole owner of SEGAL, a galvanizing company established 1983 as a joint venture.

In March 2006, Corus announced that it had agreed to sell its aluminium rolled products and extrusions
businesses to Aleris International, Inc. for €728million (£572 million). Corus was to retain its smelting
operations and supply Aleris under a long-term agreement. On 1 August, the sale to Aleris Europe was
completed. The sale took place in May 2006.
In 2006 the Mannstaedt works (Troisdorf, Germany, special profiles, acquired by BSC in 1990) was sold to
Georgsmarienhütte (GMH Holding).

HISTORY

The company is the successor, by way of the state-owned British Steel Corporation (BSC), of the leading
private steel companies that survived the Depression of the 1920s and 1930s and World War II. Under the
Labour government of 1945 to 1951 these companies first profited from the large compensation payments
they received for giving up their coal mining interests to the state and then were nationalized themselves, on
the grounds that they formed an oligopoly with the power to restrict output, raise prices, and prevent technical
progress. The Iron and Steel Corporation of Great Britain was established in 1950 as a state holding company
for their shares, but the steelmasters retained the initiative, mainly through a boycott organized by the British
Iron and Steel Federation (BISF), the industry’s trade association, which they controlled.

In the autumn of 1951 a new Conservative government suspended the corporation’s activities after eight
months of mostly ineffective existence. Between 1953 and 1963 an Iron and Steel Holding and Realisation
Agency sold off 16 of the 17 nationalized firms, mostly to the former shareholders. At the same time an Iron
Steel Board was given the negative powers of fixing maximum prices for products sold in the United
Kingdom and approving or rejecting any investment of more than £100,000. Price control was nothing new,
having begun on a more modest scale in 1932, with the result by the 1950s that losses during low points of
the economic cycle could not be offset by higher profits in more prosperous times. The companies’ reluctance
to invest intensified, and the Iron and Steel Board—or rather the taxpayers who financed it—became the
major source of new investment funds.
During the 1950s and 1960s the British steel industry lost its historic advantages of cheap coal and plentiful
iron ore, the industry’s basic raw materials. Coal prices rose by 134 percent between 1950 and 1967, and the
domestic iron ore industry was neglected in favor of ore from new fields overseas. Rearmament, from 1950
onward, caused the company to retain old plants, instead of investing in costly new plants, in the attempt to
keep up with demand. Between 1945 and 1960 total crude steel production in the United Kingdom doubled in
volume, an increase attributable in large part to such technical innovations as oxygen-based production and
continuous casting. The claim that the industry had now been taken out of politics was belied by the events of
1958 and 1959, when the Conservative prime minister, Harold Macmillan, sanctioned not the single extra
strip mill the industry wanted, but two, one at Llanwern in Wales and another at Ravenscraig in Scotland,
both subsidized from public funds and neither able to operate at full capacity.

The British steel industry’s problems, however, were not all due to the government or the companies. It faced
new rivals, especially in Japan, as well as old ones, in France, West Germany, Belgium, and Luxembourg,
which were now protected by the European Coal and Steel Community and some of which were blessed with
deep-water harbors taking in high-grade ores. In addition, there was a general fall in the rate of growth of
world demand for steel from about 1960, leading to declining prices and profits for the steel industry
worldwide, a scramble to dispose of surplus output at the lowest sustainable prices, and a worldwide steel glut
that lasted until 1969. The British industry in particular continued to be marked by a cautious attitude learned
in the 1920s and never shaken off and by the refusal of the individual firms to cooperate with one another in
anything that might threaten their own identities. The steel industry faced the 1960s with a fragmented
structure based on investment decisions that, apart from the establishment of the Ravenscraig mill, had been
made in the 1930s.
Reasons for Acquisition by Tata Steel
■
Significant Global Presence
■
19 MT Production Capacity
■
Buying is at Enterprise Value $710 per tonne
■
Matured Market for Value Added Products
■
Similar Management & Work Practices
■
Brand Image & Recognition over the Globe
■
Technology Advantage
■
Patents and R&D Facilities

AD
Downl oa d to read a d-free.

Reasons for Corus to be Sold

■
To Bailout of Debt and Financial Crisis. (Total Debt
–
1.6 bn GBP)
■
Access to high quality steel from India
■
High cost of production
■
Required supply of Raw material
Negotiating Terms

September 20, 2006 : Corus Steel has decided to acquire a strategic partnershipwith a Company
that is a low cost producer
■
October 5, 2006 : The Indian steel giant, Tata Steel wants to fulfill its ambitionto Expand its business further.
■
October 6, 2006 : The initial offer from Tata Steel is considered to be too low both by Corus and
analysts.
■
October 17, 2006 : Tata Steel has kept its offer to 455p per share.
•■
October 20, 2006 : Corus accepts terms of £ 4.3 billion takeover bid from TataSteel

Deal & Valuation

■
The deal was officially announced on April 2nd, 2007
■
Shares Buy Price: 608 pence per ordinary share in cash
■
This deal was 100% acquisition

■The total value of this acquisition amounted to ₤6.2 billion (US$12 billion)
THE STEEL INDUSTRY AND THE GLOBAL SCENARIO IN THE 2000S

The world’s crude steel output increased by 7-8 per cent a year from 2002-2006 owing to rapidly increasing
Chinese auto manufacturing, shipbuilding sectors and the major infrastructure growth, including key projects,
such as the Beijing Summer Olympics facilities in 2008. After 2004, steel prices went up and the global steel
demand continued to rise until the emergence of a global economic crisis. The costs of production depended
mainly on manufacturing and access to power and raw materials for production. Steel industry all over the
world was witnessing mergers to pool their resources, especially that of raw materials and manufacturing
technology.

In the mid-2000s, rapid growth in China’s economy and other developing countries, like that of India’s, also
created a growing steel demand. China was unwilling to depend on its domestic supplies so it relied on
international markets to satisfy their growing demands for steel. During that time, China, the world’s largest
steel manufacturer, was expected to expand its steel capacity, which could lead to lower global costs for steel.
At the time when Tata acquired Corus Steel, there weren’t many options for steel companies other than to
acquire companies or be the target for acquisition. These mergers and acquisitions were made so that they
would create even bigger giants in the steel industry, eventually resulting in instability in pricing and higher
profits for the companies that produced steel.
 THE PROCESS OF ACQUISITION

The process of the acquisition began on September 20, 2006, and ended on July 2, 2007. Both companies
have experienced many ebbs and flow throughout the process. On April 2, 2007, the Court of Justice in
England and Wales declared the finalised transaction between the two companies to be effective and in
accordance with the Scheme of Arrangement made by Tata Steel. This transaction was valued at £6.2 billion
(US$12 billion).

Tata Steel, the auction winner for Corus, declared a bid of 608 pence per share, which was higher than the
final bid of 603 pence per share from Brazilian steel company Companhia Siderurgica Nacional (CSN). Tata
Steel was required to deliver the consideration within two weeks after the date of completion of the proposed
transaction according to the regulations in the scheme. Tata Steel and Corus were interested in the M&A deal
before the start of the deal for a variety of reasons. According to the official press releases made by both the
companies, the combined entity will set up to have a crude steel production of 27 million tonnes in 2007,
with 84,000 employees spread across the globe and a joint presence in more than 40 countries. The merger
possessed a huge threat to its competitors. The world’s crude steel output increased by 7-8 per cent a year
from 2002-2006 owing to rapidly increasing Chinese auto manufacturing, shipbuilding sectors and the major
infrastructure growth, including key projects, such as the Beijing Summer Olympics facilities in 2008.
 WHAT WENT WRONG WITH THE DEAL? (REASON)

The main reason for the failure of the operations lies in the failure to pass the high cost of raw materials with
the customers due to the weak steel demand. During the five years after the deal, Tata Steel has invested in
iron ore and coal mines in various countries like Canada, Africa and Australia, to resist the inconsistencies
with the input costs in Europe. These steps were taken to insulate the loss and to increase the profit margins
over time. To complete the acquisition, Tata steel incorporated an indirect subsidiary called Tata Steel UK.

Corus’ aluminium and chemical business were some of the promising assets which were sold off by Tata
Steel. The reverse integration moves by Tata Steel to secure iron ore led to a win back gain. The addition of
domestic capacity was a key step to improve the insulation for Tata Steel against the fluctuations in the cost
of raw materials.

When the deal was entered into, there were several advantages in favour of Tata Steel and the international
steel industry was highly bullish due to the Chinese consumption. There were many benefits to Tata Steel
when the transaction was concluded, and Chinese consumption led the international market to be highly
bullish. Things have not worked out as expected and the global market entered into a spiralling recession.
There are various internal and external reasons that made the deal a mistake. Let us take a look at some of
them.

1. Bad economy

Since the takeover, European Tata Steel operations had been stagnant. Steel manufacture in the UK collapsed
in July 2011 with a flat line in the seven months. Steel production in the Netherlands was increasing and
recovered much faster from the fluctuations of the market. Further, the demand from the regional user
industries such as automobile, consumer durables and capital goods decreased. All these were reflected in the
financial performance of the company.
2. The shadow of the Chinese market

Cheaper Chinese steel flooded the European market, causing global market conditions to be distorted and
stress was placed on steel producers in the UK. China’s steel industry has witnessed massive growth,
supplying about 48% of the world’s steel consumption. Whereas the European Union contributed only 12 %.
Growth in the Chinese economy and government investment in the business sector during the high growth
phase were the main reasons for the rise in demand for steel. The slowdown reduced this demand sharply and
thus China was left with more steel than it required.

3. High energy costs

High energy costs in the UK have adversely impacted energy-intensive businesses like steel mills in
comparison to other neighbouring countries. In 2015 these companies had to pay around 9.55 ppm a kilowatt-
hour, compared to a low of 6.7 pence an hour per kilowatt-hour in 2010. The environmental policies of the
UK along with the green tax substantially increased energy costs for heavy manufacturing sectors since 2010.

4. Lack of control after the acquisition

The success of any merger or acquisition could be ensured only after taking control of the new entity. There
must be a plan to take control and sustain the business operations as a going concern. Tata continued its
activities in Europe with Philippe Varin, Chief Executive Officer of Corus since 2003. Corus recorded a loss
of £458 million in 2002 only a few weeks before his arrival.

After the acquisition of a company, the parent company must analyse the problems and solve them with their
employees. They must be present, not only as an advisor but also as an executive authority.

5. Lack of knowledge transfer

Mergers and acquisitions provide scope for enhancing the core skills, improve synergy and meet the needs of
customers by exchanging valuable information. A proper transfer of knowledge gives the companies a
competitive edge and helps them to sustain the business. In this case, there was a lack of proper knowledge
transfer which affected the synergy and incurred losses to the company.

6. Paying too much for the acquisition

Tata’s acquisition of Corus, like many of its earlier purchases, was motivated by a desire to execute bigger
deals, although it could not add much value due to the huge cost of acquisition. Tata paid far more than Corus
was worth in the transaction. Tata paid 608 pence per share in cash for Corus, which was 34% more than the
previous offering of 455 pence per share. The total settlement amount was $12 billion, with $6 billion being a
debt.

The reason Tata’s acquisition was overvalued is simply that the transaction was far too lucrative at the time,
and Tata’s management went along with the spirit of competition and paid more than they’d like. They
overlooked the fact that the connection between both the cost and the performance was proportional. The
right price for the purchase is subjective, which means there cannot be a single right price for any transaction.
When its competitors were already acquiring companies, Tata would have expected that the acquisition would
place them ahead in the game. Tata, on the other hand, lacked the self-discipline to not spend any money
more than it could afford.

7. Failing to create the expected value

In this acquisition, the created value was less than the expected value. By two years, the profitability of
Corus steel started to decline. After a month of its release, the share price started to reduce to 20%. This
indicated that the shareholders believed that the acquisition would damage the value rather than increasing
them.

8. Cultural issues

Corus steel is a company based in the UK and Tata steel is an Indian company. To get the best results from the
acquisition, the cultural dilemma which would impede the integration of the company has to be fixed. These
cultural difficulties are deeply embedded in the management of a company but have been complicated due to
the cultural differences between the countries. These issues had to be addressed before any integration

• It's been just short of five years since Tata Steel acquired Corus (now Tata Steel Europe) for over $12 billion.
The deal increased the company's steel producing capacity by five-fold. We take a quick look at how the
deal has panned out over those four years.
 POSITION BEFORE / AFTER
MERGER & ACQUISION WITH CORUS STEEL

Tata Steel signed a deal with Anglo-Dutch company, Corus to buy 100% stake at £4.3 billion ($8.1 billion)
at 455 pence per share.[30] On 19 November 2006, the Brazilian steel company Companhia Siderúrgica
Nacional (CSN) launched a counter offer for Corus at 475 pence per share, valuing it at £4.5 billion. On 11
December 2006, Tata pre-emptively upped its offer to 500 pence per share, which was within hours trumped
by CSN's offer of 515 pence per share, valuing the deal at £4.9 billion. The Corus board promptly
recommended both the revised offers to its shareholders. On 31 January 2007, Tata Steel won their bid for
Corus after offering 608 pence per share, valuing Corus at £6.7 billion ($12 billion).

In 2005, Corus employed around 47,300 people worldwide, including 24,000 in the UK.[30] At the time of
acquisition, Corus was four times larger than Tata Steel, in terms of annual steel production

BEFORE MERGER :- TATA STEEL ON 56TH POSITION AND CORUS WAS 9TH LARGEST
COMPANY

AFTER MERGER :- THE ACQUISITION MADE TATA STEEL THE WORLD'S 5TH LARGEST
PRODUCER OF STEEL.
 Post Acquisition Management:

There has been a great deal of suspicion on how well the two entities, viz., Tata Steel and

Corus plc integrate in the post acquisition situation. This concern has been expressed

since the culture and perspectives of the two companies and the people are seemingly

very different from each other. Ratan Tata however, has been confident that the post acquisition management
will not be too difficult as the two organizational cultures will be

effectively integrated.

Ratan Tata has said he is confident the two companies will have “a cultural

fit and similar work practices.”

Nearly 30 years ago J.R.D Tata had lured away a young engineer from

Corus’s predecessor company, British Steel, to work at Tata Steel. That

young Sheffield-educated engineer – Sir Jamshed J. Irani (knighted by the

Queen 10 years ago) – was Tata Steel’s Managing Director until six years

ago.

Tata Corus has made developed some management structure to deal with the smooth

operation of the two entities. It has also adopted several system integrations in both the

entities to smoothen the transactions between the two entities. 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.

The company has also created several Taskforce Teams to ensure integration specific set

of activities in the two entities for smoother transaction. For instance, the company has

created a task force to integrate the UK/EU model in construction to the Indian market.

Refer to Exhibit 17 for details of the work of this Taskforce.

The company has also created an organizational structure for Group Strategy Function.

There will be three groups in this function to undertake three activities viz., Strategy

Development, Strategic Modelling, and Industry Group. Refer to Exhibit 18 for details

on purpose and activities of the Group Strategy Function.

 Tata Steel - Balance Sheet, 1997-2008

Scaling Factor : 1000000 INR Currency

: INR
ASSETS 03/31/08 03/31/07 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02 03/31/01 03/31/00 03/31/99
03/31/98
03/31/97

Cash And ST Investments 42'316.40 108'879.6 7'767.50 4'657.30 2'778.70 4'103.00 2'473.10 2'392.30 4'089.00 3'361.90 4'294.10
0 2'513.80
Receivables (Net) 340'431.90 19'952.50 21'983.8 20'209.3 13'873.8 16'510.1 17'538.2 19'186.5 12'727.1 13'449.7 14'244.30
0 0 0 0 0 0 3 8 17'566.42
Total Inventories 230'643.40 38'881.30 27'733.1 24'899.0 13'740.4 12'134.7 11'809.8 8'955.70 9'226.60 9'936.50 10'397.00
0 0 0 0 0 10'211.10
Other Current Assets 0 0 11 6.6 2.9 1'698.00 1'801.90 262.90 4'990.87 3'929.72 3'921.20
3'336.68
Current Assets – Total 614'667.20 184'441.2 59'080.6 50'719.7 43'701.6 38'781.5 35'623.3 32'256.1 32'406.3 32'302.8 34'201.40
0 0 0 0 0 0 0 0 0 34'512.50
Property Plant & Equipment - Net 412394.4 141441.1 107340.8 96807.1 80172.3 76600.8 77722.6 75380.9 74240.6 70585.8 63000.4
5
5264
Total Investments #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

#N/A
Other Assets 189'292.70 5'058.50 4'240.30 3'564.50 1'565.10 106.60 10'134.4 9'202.90 8'281.20 5'540.00 2'970.70
0 2'783.20
Total Assets 1'250'028. 495'915.80 205'450.70 147'988. 127'600.80 125'309. 120'803.90 106'407. 99'208.
60 177'033.10 70 131'372.60 10 114'283.00 00 70

LIABILITIES & SHAREHOLDERS' 03/31/08 03/31/07 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02 03/31/01 03/31/00 03/31/99 03/31/98 03/31/9
EQUITY 7

Accounts Payable 256'958.40 50'741.50 30'278.2 32'051.3 21'513.5 18'364.2 4'917.40 3'100.40 3'155.30 3'874.00 3'405.40 3'529.0
0 0 0 0 0
ST Debt & Current Portion of LT 5'007.20 13'945.00 3'752.60 3'362.90 2'433.30 4'325.30 5'617.60 787.40 6'997.20 9'404.40 6'120.10 782.80
Debt
Income Taxes Payable 22540.7 5639.9 3369.3 3434.9 14252.3 4'855.60 1'803.60 1'802.00 1'670.40 1'855.30 1'505.80 1'114.0
0
Other Current Liabilities 18'492.50 5'951.70 4'771.00 4'824.80 3'976.10 1'531.40 8'848.20 9'803.00 7'843.40 6'827.60 7'084.30 7'414.3
0
Current Liabilities – Total 315'373.70 85'940.50 49'573.0 51'006.0 45'998.8 315'373. 27'254.9 21'554.2 25'195.2 27'364.3 23'245.0 17'407.
0 0 0 70 0 0 0 0 0 10
Long Term Debt 528'642.10 233'053.6 27'876.2 27'902.6 30'598.8 38'953.2 44'338.1 45'932.7 42'073.1 39'982.9 39'669.7 40'043.
0 0 0 0 0 0 0 0 0 0 10
Other Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Liabilities 899'787.20 343'535. 101'396. 102'726. 100'935. 94'347.1 95'950.8 76'424.8 75'219.9 72'638.8 65'758.2 59'468.
30 60 30 30 0 0 0 0 0 0 50

Shareholders' Equity

Minority Interest 8'327.00 5'983.90 1'235.70 935.20 486.60 309.70 236.30 0.00 0.00 0.00 0.00 0.00

Preferred Stock 54'725.20 0.00 0.00 0.00 0.00 0.00 0.00 1'400.00 1'500.00 0.00 0.00 0.00

Common Equity 287'189.20 146'396.6 102'818. 73'371.6 46'566.8 32'944.0 35'185.5 47'484.3 44'084.0 41'644.2 40'648.8 39'740.
0 40 0 0 0 0 0 0 0 0 20
Retained Earnings 11.20 11.20 11.20 11.20 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

Total Liabilities & Shareholders' 1'250'028. 495'915.80 177'033. 147'988. 127'600.80 131'372.60 120'803.90 114'283.00 99'208.
Equity 60 205'450.70 10 70 125'309.10 106'407.00 70
 Tata Steel – Income Statement, 1997-2008

Scaling Factor : 1000000 INR Currency:

10 YR INCOME STATEMENT 03/31/08 03/31/07 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02 03/31/01 03/31/00 INR
03/31/99 03/31/98
03/31/97

Net Sales or Revenues 1'315'358.8 251'917.3 202'444.30 159'986.1 111'294.4 91'368.2 74'279.1 61'019.6 55'737.6 51'067.60 51'992.30
0 0 0 0 0 0 0 0 51'206.20

Cost of Goods Sold 1'073'314.8 162'544.7 128'736.00 90'227.60 70'419.40 63'572.2 56'950.0 38'372.7 38'584.6 37'517.45 38'090.89
0 0 0 0 0 8 35'994.73

Depreciation, Depletion & 41'369.50 11'779.30 8'603.70 6'454.60 6'405.50 5'696.90 5'473.20 6'937.70 5'840.40 4'971.50 4'551.00
Source: Thomson Financial

4'108.20

Gross Income 200'674.50 77'593.30 65'104.60 63'303.90 34'469.50 22'099.1 11'855.9 15'709.2 11'312.5 8'578.65 9'350.41
0 0 0 2 11'103.27
Selling, General & Admin #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
Expenses #N/A

Operating Expenses – Total 1'175'627.1 188'539.2 147'701.00 104'427.8 82'010.60 74'016.3 66'473.1 48'984.5 47'694.2 45'501.90 45'467.20
0 0 0 0 0 0 0 42'747.60

Operating Income 139'731.70 63'378.10 54'743.30 55'558.30 29'283.80 17'351.9 7'806.00 12'035.1 8'043.40 5'565.70 6'525.1 8'458.60
0 0 0

Non-Operating Interest Income 3'556.10 2'228.80 459.60 404.70 191.30 381.80 307.50 357.80 390.10 967.30 1'188.8 1'614.90
0

Earnings Before Interest And 208'894.40 69'296.80 56'874.80 56'810.40 28'633.00 16'325.3 6'761.70 10'148.3 8'654.40 6'760.80 6'871.5 9'320.40
Taxes 0 0 0

Interest Expense On Debt 45'886.40 6'356.70 2'064.10 2'386.00 1'519.20 3'633.30 4'499.10 4'819.00 5'290.00 5'229.40 4'651.4 4'639.50
0

Pretax Income 163'500.70 62'956.10 54'859.90 54'424.40 27'148.70 12'789.6 2'422.70 6'024.40 4'770.90 3'157.30 3'637.3 5'429.60
0 0

IncomeTaxes 40'283.10 21'300.00 17'649.20 18'712.40 9'362.50 2'566.80 487.00 490.00 540.00 330.00 412.50 730.00

Minority Interest 1'399.40 675.20 186.40 259.60 192.80 67.60 11.50 0.00 0.00 0.00 0.00 0.00

Equity In Earnings 1'681.60 791.80 321.90 580.20 294.40 151.30 0.00 0.00 0.00 0.00 0.00 0.00
14

Net Income Before Extra 123'499.80 41'772.70 37'346.20 36'032.60 17'887.80 10'306.5 1'924.20 5'534.40 4'225.90 2'822.30 3'220.8 4'692.10
0 0

Extr Items & Gain(Loss) Sale of 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net Income Before Preferred 123'499.80 41'772.70 37'346.20 36'032.60 17'887.80 10'306.5 1'924.20 5'534.40 4'225.90 2'822.30 3'220.8 4'692.10
0 0

Preferred Dividend 221.90 0.00 0.00 0.00 0.00 0.00 22.80 122.00 86.10 0.00 0.00 0.00
Requirements
Net Income Available to 123'277.90 41'772.70 37'346.20 36'032.60 17'887.80 10'306.5 1'901.40 5'412.40 4'139.80 2'822.30 3'220.8 4'692.10
Common 0 0
 Tata Steel – Trend & Growth Rate Report, 2001-2006

Scaling Factor : 1000000 INR Currency:

INR
TREND 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02 03/31/01

Sales 202,444.30 159,986.10 111,294.40 91,368.20 74,279.10 61,019.60

Operating Income After Depreciation 54,743.30 55,558.30 29,283.80 17,351.90 7,806.00 12,035.10

NetIncome 37,346.20 36,032.60 17,887.80 10,306.50 1,901.40 5,412.40

Net Cash Flow From Operating Activities 36,996.20 30,751.90 29,713.60 18,416.90 #N/A 11,223.30

Net Cash Flow From Investing Activities 27,285.90 21,191.30 20,825.90 8,689.00 #N/A 6,763.60

Net Cash Flow From Financing Activities -6,808.60 -8,906.80 -10,215.80 -8,131.30 #N/A -4,001.20

TotalAssets 205,450.70 177,033.10 147,988.70 127,600.80 131,372.60 125,309.10

TotalLiabilities 101,396.60 102,726.30 100,935.30 94,347.10 95,950.80 76,424.80

5 Yr GROWTH RATES 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02 03/31/01

Sales 231.77% 187.03% 117.94% 75.73% 45.06% 27.97%

NetIncome 590.01% 770.39% 533.80% 220.00% -59.48% -4.34%

Net Cash Flow From Operating Activities 381.05% 259.59% 223.04% 132.41% #N/A 92.02%

TotalAssets 63.96% 46.55% 29.49% 19.92% 32.42% 36.06%

Source: Thomson Financial

 Consumption of Steel in India, 1990-91 to 2002-03

Year
(In million tones) Consumption Levels
1990-91 14.37
1991-92 14.83 (3.2%)
1992-93 15.00 (1.2%)
1993-94 15.32 (2.0%)
1994-95 18.66 (21.8%)
1995-96 21.65 (16.0%)
1996-97 22.13 (2.2%)
1997-98 22.63 (2.6%)
1998-99 23.54(4.02%)
1999-2000 25.01(6.24%)
2000-2001 26.53(6.08%)
2001-2002 27.44(3.39%)
2002-2003 20.65 (5.0%)

Note: The consumption of steel is arrived at by subtracting export of steel from the total of
domestic production and adding the import of steel in the country

Source: The Indian Ministry of Steel (the number in brackets indicates the percentage increase from
the previous year).

Tata Corus – Projected Capacity

Tata Steel - Corus: Projected capacity (in

million tones per annum)
Corus Group (in UK and The Netherlands) 19

Tata Steel - Jamshedpur 10

Tata Steel - Jharkhand 12

Tata Steel - Orissa 6

Tata Steel - Chattisgarh 5

NatSteel – Singapore 2

Millennium Steel – Thailand 1.7

Aggregate projected capacity 55.7

Source: Internationa l Iron and Steel Institute

 Global Steel Ranking

Global steel ranking

Company Capacity (in million to tonnes)

Arcelor – Mittal 110.0

Nippon Steel 32.0

Posco 30.5

JEF Steel 30.0

Tata Steel – Corus 27.7

Bao Steel China 23.0

US Steel 19.0

Nucor 18.5

Riva 17.5

Thyssen Krupp 16.5

Source: International Iron and Steel Institute

Comparative cost of steel production (Figures in %)

Item USA UK France Germany India (Base)

Energy 24.1 19.8 22.1 23.4 32.9
Iron Ore 15.4 12.7 12.7 13.9 5.4
Fluxes and Ferro alloys 5.9 7.6 7.6 6.8 8.5
Others 25.6 27.5 27.3 27.1 21.9
Total materials 71.0 67.6 69.7 71.2 68.8
Labour 40.7 27.1 36.6 43.4 13.9
Miscellaneous Taxes 1.9 1.9 4.1 2.4 6.6
Works cost 113.6 96.6 110.5 117.1 89.3
Depreciation & interest 9.1 6.6 2.4 12.2 10.7
Total cost 122.7 103.2 122.9 129.3 100.0

Source: IE (I) Journal-MM, vol 82, April 2002, p17

 Global Steel Output

Global Steel Output

(in million tons)
Country 2005 2006 % change
China 355.8 418.8 17.7
Japan 112.5 116.2 3.3
US 94.9 98.5 3.8
Russia 66.1 70.6 6.8
South Korea 47.8 48.4 1.3
Germany 44.5 47.2 6.1
India 40.9 44.0 7.6
Ukraine 38.6 40.8 5.7
Italy 29.4 31.6 7.5
Brazil 31.6 30.9 (2.2)
World production 1,028.8 1,120.7

Source: International Iron and Steel Institute

Corus Group PLC - Balance Sheet, 1996-2005

Scaling Factor : 1000000 GBP Currency: GBP

ASSETS 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 03/31/99 03/31/98 03/31/97 03/31/96

Cash And ST Investments 956.00 600.00 380.00 270.00 184.00 273.00 1'369.00 1'206.00 1'477.00 1'350.00
Receivables (Net) 1'533.00 1'393.00 1'133.00 1'241.00 1'396.00 1'794.00 1'231.00 1'526.00 1'494.00 1'717.00
Total Inventories 1'954.00 1'732.00 1'404.00 1'337.00 1'320.00 1'719.00 1'007.00 1'222.00 1'224.00 1'391.00
Other Current Assets 3 0 0 0 0 0.00 0.00 0.00 0.00 0.00
Current Assets – Total 4'446.00 3'725.00 2'917.00 2'848.00 2'900.00 3'877.00 3'607.00 3'954.00 4'195.00 4'458.00
Property Plant & Equipment – Net 2820 2811 2729 2871 3064 3763 3240 3335 3259 3265
Total Investments #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A
Other Assets 296.00 408.00 432.00 425.00 426.00 375.00 84.00 117.00 116.00 107.00
Total Assets 7'770.00 7'119.00 6'237.00 6'294.00 6'941.00 8'243.00 7'171.00 7'700.00 7'876.00 8'143.00

LIABILITIES & SHAREHOLDERS' EQUITY 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 03/31/99 03/31/98 03/31/97 03/31/96

Accounts Payable 1'271.00 1'188.00 986.00 1'047.00 1'052.00 1'086.00 733.00 853.00 836.00 928.00
ST Debt & Current Portion of LT Debt 384.00 47.00 113.00 78.00 132.00 183.00 81.00 73.00 74.00 126.00
Income Taxes Payable 79 117 94 121 108 1.00 18.00 83.00 155.00 305.00
Other Current Liabilities 733.00 531.00 390.00 390.00 437.00 564.00 387.00 526.00 496.00 523.00
Current Liabilities – Total 2'467.00 1'883.00 1'583.00 1'636.00 1'729.00 2'467.00 1'359.00 1'672.00 1'705.00 2'025.00
Long Term Debt 1'308.00 1'407.00 1'280.00 1'428.00 1'612.00 1'766.00 825.00 687.00 618.00 534.00
Other Liabilities 46.00 26.00 28.00 36.00 34.00 71.00 27.00 36.00 19.00 17.00
Total Liabilities 4'392.00 3'786.00 3'353.00 3'485.00 3'774.00 4'344.00 2'464.00 2'687.00 2'683.00 2'898.00

Shareholders' Equity
Minority Interest 26.00 42.00 47.00 47.00 60.00 402.00 311.00 351.00 367.00 442.00
Preferred Stock 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Common Equity 3'352.00 3'258.00 2'797.00 2'722.00 3'061.00 3'440.00 4'346.00 4'604.00 4'757.00 4'723.00
Retained Earnings 1'199.00 -1'145.00 -1'605.00 -1'389.00 -1'047.00 -665.00 919.00 1'195.00 1'383.00 1'350.00
Total Liabilities & Shareholders' Equity 7'770.00 7'119.00 6'237.00 6'294.00 6'941.00 8'243.00 7'171.00 7'700.00 7'876.00 8'143.00

Source: Thomson Financial

 Corus Group PLC - Income Statement, 1996-2005

Scaling Factor : 1000000 GBP Currency: GB

12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 03/31/99 03/31/98 03/31/97 03/31/

Net Sales or Revenues 10'140.00 9'332.00 7'953.00 7'188.00 7'699.00 9'358.40 6'259.00 6'947.00 7'224.00 7'048.
Cost of Goods Sold 8'343.00 7'658.00 7'124.00 6'575.00 6'941.00 7'711.20 5'280.00 5'443.00 5'606.00 4'999.
Depreciation, Depletion & 312.00 294.00 323.00 350.00 386.00 939.20 313.00 306.00 298.00 281.
Gross Income 1'485.00 1'380.00 506.00 263.00 372.00 708.00 666.00 1'198.00 1'320.00 1'768.
Selling, General & Admin Expenses 765.00 759.00 565.00 649.00 749.00 803.20 408.00 457.00 424.00 508.
Operating Expenses – Total 9'420.00 8'711.00 8'012.00 7'574.00 8'076.00 9'453.60 6'377.00 6'640.00 6'787.00 6'107.
Operating Income 720.00 621.00 -59.00 -386.00 -377.00 -95.20 -118.00 307.00 437.00 941.
Non-Operating Interest Income 31.00 13.00 13.00 17.00 15.00 31.20 92.00 91.00 90.00 67.
Earnings Before Interest And Taxes 707.00 663.00 -150.00 -314.00 -351.00 -885.60 -70.00 369.00 486.00 1'019.
Interest Expense On Debt 128.00 131.00 111.00 109.00 118.00 126.40 66.00 52.00 48.00 45.
Pretax Income 579.00 532.00 -261.00 -423.00 -469.00 -1'012.00 -136.00 317.00 438.00 974.
IncomeTaxes 129.00 113.00 52.00 55.00 -48.00 4.80 -23.00 77.00 140.00 243.
Minority Interest -1.00 -6.00 -3.00 -7.00 0.00 56.00 -42.00 7.00 -3.00 49.
Equity In Earnings 1.00 21.00 5.00 13.00 2.00 -6.40 -10.00 -7.00 9.00 95.
Net Income Before Extra 452.00 446.00 -305.00 -458.00 -419.00 -1'079.20 -81.00 226.00 310.00 777.
Extr Items & Gain(Loss) Sale of 0.00 0.00 0.00 0.00 0.00 #N/A 0.00 0.00 0.00 0.
Net Income Before Preferred 452.00 446.00 -305.00 -458.00 -419.00 -1'079.20 -81.00 226.00 310.00 777.
Preferred Dividend Requirements 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.
Net Income Available to Common 452.00 446.00 -305.00 -458.00 -419.00 -1'079.20 -81.00 226.00 310.00 777.

Source: Thomson Financial

Liabilities of Corus Steel as on Year 2006

Liabilities (in GBP million) Total < 1 yr 1-3 yrs 3-5 yrs >5 yrs
Long term debt obligations 1,101 - 567 534 -
Finance Lease obligations 159 24 36 26 73
Interest commitments 331 82 149 94 6
Operating lease obligations 462 75 102 76 209
Purchase obligations 350 331 13 6 -
Other long term liabilities 30 - - - 30
Total 2,433 512 867 736 318

Source: Corus Report & Accounts 2006

Corus Group PLC - Income Statement, 1996-2005

Scaling Factor : 1000000 GBP Currency: GB

 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 03/31/99 03/31/98 03/31/97 03/31/

Net Sales or Revenues 10'140.00 9'332.00 7'953.00 7'188.00 7'699.00 9'358.40 6'259.00 6'947.00 7'224.00 7'048.
Cost of Goods Sold 8'343.00 7'658.00 7'124.00 6'575.00 6'941.00 7'711.20 5'280.00 5'443.00 5'606.00 4'999.
Depreciation, Depletion & 312.00 294.00 323.00 350.00 386.00 939.20 313.00 306.00 298.00 281.
Gross Income 1'485.00 1'380.00 506.00 263.00 372.00 708.00 666.00 1'198.00 1'320.00 1'768.
Selling, General & Admin Expenses 765.00 759.00 565.00 649.00 749.00 803.20 408.00 457.00 424.00 508.
Operating Expenses – Total 9'420.00 8'711.00 8'012.00 7'574.00 8'076.00 9'453.60 6'377.00 6'640.00 6'787.00 6'107.
Operating Income 720.00 621.00 -59.00 -386.00 -377.00 -95.20 -118.00 307.00 437.00 941.
Non-Operating Interest Income 31.00 13.00 13.00 17.00 15.00 31.20 92.00 91.00 90.00 67.
Earnings Before Interest And 707.00 663.00 -150.00 -314.00 -351.00 -885.60 -70.00 369.00 486.00 1'019.
Taxes
Interest Expense On Debt 128.00 131.00 111.00 109.00 118.00 126.40 66.00 52.00 48.00 45.
Pretax Income 579.00 532.00 -261.00 -423.00 -469.00 -1'012.00 -136.00 317.00 438.00 974.
IncomeTaxes 129.00 113.00 52.00 55.00 -48.00 4.80 -23.00 77.00 140.00 243.
Minority Interest -1.00 -6.00 -3.00 -7.00 0.00 56.00 -42.00 7.00 -3.00 49.
Equity In Earnings 1.00 21.00 5.00 13.00 2.00 -6.40 -10.00 -7.00 9.00 95.
Net Income Before Extra 452.00 446.00 -305.00 -458.00 -419.00 -1'079.20 -81.00 226.00 310.00 777.
Extr Items & Gain(Loss) Sale of 0.00 0.00 0.00 0.00 0.00 #N/A 0.00 0.00 0.00 0.
Net Income Before Preferred 452.00 446.00 -305.00 -458.00 -419.00 -1'079.20 -81.00 226.00 310.00 777.
Preferred Dividend Requirements 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.
Net Income Available to 452.00 446.00 -305.00 -458.00 -419.00 -1'079.20 -81.00 226.00 310.00 777.
Common

Source: Thomson Financial

Liabilities of Corus Steel as on Year 2006

Liabilities (in GBP million) Total < 1 yr 1-3 yrs 3-5 yrs >5 yrs
Long term debt obligations 1,101 - 567 534 -
Finance Lease obligations 159 24 36 26 73
Interest commitments 331 82 149 94 6
Operating lease obligations 462 75 102 76 209
Purchase obligations 350 331 13 6 -
Other long term liabilities 30 - - - 30
Total 2,433 512 867 736 318

Source: Corus Report & Accounts 2006

 Acquisitions of Corus prior until 2004

Date of the Deal Company Name Description

November 1, 2000 Cogifer Ltd. 50/50 joint venture with the French
manufacturer of switches and crossings,
Cogifer Ltd, a world leader in its field of
business. The venture was expected to combine
the strong market presence of Corus in the UK
and the industrial competence of Cogifer.
September 27, Corus’ subsidiary The newly formed company, Avesta Polarit was
2000 companies, Avesta then the second largest stainless steel producer in
Sheffield AB and the world.
Outokumpu Steel
January 2000 Corus Group Plc and 50/50 joint venture with Danieli & Co. Officine
Danieli & Co. Officine Meccaniche SpA, an Italian equipment producer.
Meccaniche SpA The newly formed entity was called
Danieli Corus technical Services BV.
Year 2000 Corus Aluminum Joint venture agreement with a Chinese
Extrusions and Tjanjin Non municipality owned company Tjanjin Non
Ferrous Metal Group Ferrous Metal Group (TNMG). The designing
(TNMG) and manufacture of the products, large extruded
aluminum sections is completed in facilities
located in China and is aimed for sale to the
transport, mechanical and electrical engineering
industries.
Year 2001 Savera Group Joint venture with a global supplier of elevator
guide rails and other various components. The
new entity is called Savera UK Ltd and is
expected to be a major competitor in the elevator
industry.
Year 2001 Corus Building Systems 50/50 joint venture with British suburban and
and Redrow Plc. commercial property developer, Redrow Plc.
 The new company is called Framing Solutions
and is set to provide steel frames for the British
small scale residential industry.
17 July 2002 Brazilian steel producer Agreement for a potential merger between the
CSN two companies. Under the terms of the proposed
merger current Corus shareholders will obtain
62.4 per cent of the enlarged group. The
transaction will be structured in such a way that
the existing CSN shareholders will receive
shares in a new Brazilian listed holding company
(“TopCo”) which will, in turn, hold
37.6 per cent of the share capital of the enlarged
Corus.
Year 2002 Corus Building Systems An acquisition of a Swedish based metal
(CBS) and a Swedish producer, which will allow the company to
based metal producer expand and strengthen its presence in the
Swedish market.
Year 2002 Precoat 100% acquisition of the equity of one of the
principal independent precoated steel service
centers in Britain, Precoat.
Year 2003 Arcelor S.A. Sollac Purchase of Sollac’s 50% share in a Portuguese
Méditerranée ('Sollac') base company called Lusosider Projectos
Siderugicos S.A. which is also a joint venture
between Corus and Arcelor. The total cost of this
purchase amounted to EUR10.84 million
that Corus paid in cash.
Year 2003 Clayton Metals Inc Clayton Metals Inc. completed an acquisition of
Corus Aluminum Service Centers Inc. which
positioned the new enlarged entity as the leading
national distributor of non- ferrous metal
products in the whole U.S.market.
Year 2004 Corus Staal B.V. and Segal Acquisition of a Belgian hot dipped galvanizing
 S.A line, Segal S.A for 50 per cent of the
shares.
The purchase amounted to EUR25 million.
Year 2004 Corus Staal B.V. and Segal Corus made an announcement that it will
S.A purchase the remaining 50 per cent of shares
in Segal S.A. The purchase was comp leted by
the end of 2004 and was carried out from an
investment fund called Metal Investment
Fund and was paid in cash by Corus for a total
of EUR25 million.

April 2004 Arcelor Corus’ UK hot-rolled steel sheet piling

business was acquired by Arcelor. Even
though Arcelor acquired the assets from
Corus, they did not include the company’s
manufacturing facilities where Corus decided
to terminate the production due to the
implementation of its UK Restructuring
Programme initiative.
 Tata Steel completes £6.2bn acquisition of Corus Group plc

Tata Steel (“the Company) is happy to announce tha t the Company has completed its
£6.2 billion (US$12 billion) acquisition of Corus Group plc (Corus) at a price of 608 pence
per ordinary share in cash. The enlarged company will have a pro forma crude steel
production of 27 million tonnes in 2007 and will be the world’s fifth largest steel producer
with 84,000 employees across four continents.

The combination of Tata Steel, a vertically integrated steel producer and one of the world’s
most profitable steel companies, with an established and growing presence in India, South
East Asia and the Pacific-rim countries, and Corus, Europe’s second largest steel producer,
with a high value added product range and strong positions in automotive, construction and
packaging, will create the world’s second most global steel producer with a combined
presence in 45 countries.

Commenting, Mr Ratan Tata, Chairman of Tata Steel and Corus, said: "The completion of
this acquisition of Corus by Tata Steel is a major step forward in the Company’s global
strategy and represents an exciting future for both businesses. I firmly believe that both
Tata Steel and Corus, two companies with long, proud histories, share a common business
culture and a global vision for the business.

Corus’ top management will remain with the enlarged Group and the bringing together of
both management teams is an expression of the strong confidence and trust that exists
between the two organisations, which will ensure the successful integration of the
combined business. Together we are a well balanced company, strategically well placed to
compete at the leading edge of a rapidly changing global steel industry.”

Jim Leng, Retiring Chairman of Corus, said: "Corus had twin objectives from the outset.
One was to secure the best value for our shareholders and the other was to ensure the best
strategic future for the business. With Tata Steel, we have delivered both and the directors,
senior management and other employees of Corus will see today as the beginning of an
exciting new era. The Corus and Tata Steel combination will enable us to build on
complementary skills in global markets. I am very much looking forward to working with
Mr. Ratan Tata and the Boards and directors in both companies.”

The completion of the transaction is pursuant to the Scheme of Arrangement of the Tata
Steel Scheme being declared effective by the High Court of Justice in England and Wales
(the “Court”) today April 2, 2007. Tata Steel had announced on 7 February 2007 that it
intends to despatch the consideration pursuant to the Scheme as soon as practicable
following the Effective Date and, if practicable, on the Effective Date. Tata Steel is, under
the terms of the Scheme required to despatch the consideration pursuant to the Scheme not
more than 14 days after the effective date.

Source: Corporate communication Newsroom; for still images visit www.newscast.co.uk /

for broadcast footage, visit: www.thenewsmarket.co.uk
 Corus Acquisition Cost and Sources of Funds

GBP m US$ m INR Bn Remark

Equity contribution in Tata Steel UK 3,732 7,308 292

Debt raised by Tata Steel UK (non recourse) 3,150 6,168 247
Total Acquisition cost 6,882 13,447 539
Long term loan through Tata Steel UK (non 3,150 6,168 247
recourse)
Internal generation (includes pref. issue to 594 1,163 47 Of this amount Rs. 27.7bn was
Tata Sons) raised by pref. allotment to Tata
Sons
ECB Funds 842 1,649 66 Loans from IFC, etc
Conv. Alternative Ref Sec CARS 420 875 35 1% coupon, Rs 876.62/share
conversion price
Rights issue equity (1:5) @ Rs 300/share 466 913 37
Rights issue conv. Pref sh @ Rs. 600/share 700 1,370 55 2% coupon, 6 CCPS will
automatically convert to 1 equity
share on 1 Sept 09
Unsecured debentures 255 500 20

Equity related instruments- yet to be raised 455 887 36

Total Acquisition funding 6,882 13,526 541

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 Corus Acquisition Financing

Tata steel is pleased to announce the refinancing of its GBP 3,620 million acquisition
bridge facility and revolving credit facility which had been provided by Credit Suisse,
ABN AMRO and Deutsche Bank to fund its acquisition of Corus Group plc that was
completed on April 2, 2007.

The refinancing is by way of non recourse Facilities totaling GBP 3,170 million (the
“Refinancing Facilities”) which are being Arranged by a syndicate led by Citigroup, ABN
AMRO and Standard Chartered Bank. This refinancing provides significant benefits and
flexibility over the term of financing to the group.

The Refinancing Facility comprises a five year GBP 1670 million amortizing loan which
will be syndicated by the joint book runners to relationship banks of Tata steel and Corus
and a seven year minimally amortizing term loan of GBP 1500 million that will be
syndicated to institutional investors and banks in the USA, Europe and Asia. The balance
amount of the acquisition bridge is being repaid by an additional equity contribution by
Tata Steel/ Tata Steel Asia which had been previously disclosed on April 17, 2007.

Subsequent to the conclusion of the discussions on the commercial terms of the financing,
the process to discuss the security package for the above transaction will commence with
the Trustees of the UK Pension Funds in continuation of the dialogue with the Trustees
from October 2006. Concurrently, Corus will engage in the consultative process with the
Corus Netherlands Works Council to seek their advice on the above financing.

Tata Steel is one of India’s largest companies and is amongst the world’s lowest cost steel
producers and most profitable steel companies. Corus Group plc is Europe’s second largest
steel producer and the combined entity is the fifth largest steel producer in the world with
an installed capacity of 28 million tons p.a.

Source: Corporate Communication Newsroom; Mumbai/London – May 3, 2007

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 Tata Corus Taskforce

Post Tata Corus merger, Tata Steel has access to considerable IP and expertise in
Construction from UK/EU based models. The key driver is to find ways to utilize this
knowledge and assist the capture of value for Tata Steel in the construction market in India.
To achieve, a taskforce comprising of following executives from both the entities is being
formed with immediate effects.

Members from Corus :

Mr. Matthew Poole (Director Strategy Long Products Corus)
Mr. Colin Ostler (GM Corus Construction Centre)
Mr. Darayus Shroff (Corus International)

Members from Tata Steel:

Mr. Sangeeta Prasad (CSM South, Flat Products)
Mr. Pritish Kumar Sen (Market Research Group)
Mr. Rajeev Sahay (Head Planning & Scheduling, TGS)

The scope of the taskforce will be to:

1. Ensure smooth market knowledge exchange between Tata Corus and Tata
Bluescope and identify Knowledge gaps.
2. Complete mapping of construction sector for Indian market using external
resource if necessary.
3. Understand key drivers for construction through knowledge gained from
stakeholders of the construction community.
4. Map key competencies of Tata Corus against market drivers/ requirements.
5. Develop a five- year strategy.

The taskforce members will report to Mr. Paul Lormor (Director Construction
Development ).
The engagement of the members of the taskforce will be on part time basis and they
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 will continue to discharge their current responsibilities.
The taskforce will continue till June 2008, by which time it is expected to taskforce
prepare the business case and place it before the board for approval

Tata Steel Ltd.

B. Muthuraman- (Managing Director Tata Steel)
Philippe Varin (CEO Corus Group)

Source: Internal Office Communication, Tata-Corus

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 Group Strategy Function - Tata Corus

The Tata Steel Group has the ambition to become a bench mark in the global steel industry in
terms of value creation and corporate citizenship. The group strategy function will be organized
to support the delivery of the group ambition. The main responsibilities of the group strategy
function are as follows:

• To originate the group strategy i.e. portfolio management, market sector positioning,
industrial foot print, partnerships and alliances, and translate the Group strategy into
strategy action plans.
• To organize and support the strategic planning process across the group
• To originate and assess corporate business development initiatives i.e. corporate
partnerships/alliances.
• To monitor the steel industry which includes macro economic trends, steel market
dynamics, competitive arena, technology, standards and regulations

The group strategy team will be organized into three groups based in several locations, reporting
to Jean- Sebastien Jacques, Group Director, Strategy:

• The strategy /business development group will be responsible for developing the group
strategy and supporting corporate development initiatives. This group will be based out
of London and composed of Mrs Leonie Greenfield, Ms Susanne Rosengren, Mr Fillip
Vrabel and Mr Matthew Poole (Joint role with lo ng product division –Corus)
• The strategic Modeling group will be responsible for developing and maintaining the
central strategic models and benchmarking analysis. Dr.Paul Butterworth, as group chief
(Strategic Modelling), will head this group with the support of Mr. Santosh Agarwal and
will be based out of kolkata.
• The industry group will be responsible for industry monitoring, market intelligence and
for issuing assumptions required to support the strategic and forecasting processes
across the group. This group bases out of Kolkata will also handle interfaces with
industry trade associations i.e. IISI, Eurofer, etc and will be headed by Mr. Ashok K umar

29
 Pandey, Group chief (Industry).The existing Tata steel market research group (MRG) will
be merged into the industry group. The main industry group will work very closely with
Mr.Ben Carstein, the Group Economist based in London.

Ms Janice Curtis will support the group strategy function, the organization and logistics of
certain group committees e.g. Strategy and Integration Committee, Joint Executive committee
and Capital Expenditure committee.

The new organization will be effective from 1 may 2008.

Jean-Sebastien Jacques

Source: Organization Circular, Tata Corus

30
 CONCLUSION

The Tata Corus acquisition was the largest private-sector transaction conducted by an Indian company outside of India.
At one point the merged entity became the fifth most revenue-generating steel company all over the world. This
acquisition may have resulted in a variety of benefits. Tata Steel was one of the world’s most lucrative steel businesses,
and the acquisition gave space for a lot of research and learning space. English being one of the most common
languages in India has aided the process of integration.

Tata Steel had done many successful cross border acquisitions in the past. Unfortunately, the merger did not turn out to
be successful and incurred losses. The story of Tata’s acquisition of Corus ended on a sad note. It is important to
analysis the reasons and understand where it went wrong. Being a better provider of capital investment, offering
excellent management supervision and transferring valuable knowledge are the most important conclusions that could
be drawn from the mistakes. The various concerns raised need to be taken care of while companies go for acquiring
companies across borders much bigger than them.

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Plagiarism report

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