TATA STEEL -

GOODWILL
AND
ACQUISITION
OF CORUS
GROUP 5
Bid and Valuation details
Tata Steel of India Companhia Siderurgica Nacional (CSN) of Brazil

Tata steel makes an offer of 455

Cash offer of 5.1 billion GB CSN makes an offer of 475 Cash offer of 5.3 billion GB
pence per share which is
pounds pence per share pounds
nothing but 455 Rs. Per share

Corus reports 63 percent increase in quarterly profits

Tata steel raises the offer now
Cash offer of 5.5 billion GB CSN raises its offer to 515 Cash offer of 5.75 billion GB
by 10 percent and offers 500
pounds pence per share pounds
pence per share

Financial markets anticipating and hyped the counter offer to 545 pence per share

Tata Steel and CSN agrees for an auction

Tata steel offers price of 608 Cash offer of 6.2 billion GB CSN places only 603 pence per Cash offer of 6 billion GB
pence per share pounds share pounds

Tata Steel wins the auction and acquires 21.1 percent of the equity share capital

Courts officially approve the acquisition of Corus by Tata Steel

Goodwill Impairment of Tata Steel
What is Goodwill impairment?

• When the Fair value of the acquired company falls below the book value or falls below the fair value
at the time of acquiring, then the goodwill has to be adjusted in the balance sheet

• Usually this would happen, if the acquired company is not performing well and is facing losses which
results in the reduction of its fair value price
• Example: Assuming, Company A purchases Company B for 15 million $ where its fair value is 13
million $ and book value is 10 million $. So the goodwill here is 2 million $.

• After acquisition, the sales has fallen down to 40% resulting its fair value now to reduce below 13
million $ to 11 million $. So as per the impairment, the goodwill of 2 million $ should be reduced.
Goodwill Impairment of Tata Steel
How does Goodwill impairment affect the Balance sheet and Income statement?

• The Impairment will be added in the operating expense as part of the P&L Account.

• But the positive side is the impairment reduces the value of asset thereby increasing the ROA ratio and
RoCE ratio.

• Impairment expense is just a non-cash expense and in the cash flow statement, it will be added back
similar to the depreciation expense.

• In the balance sheet side, the Asset value will be reduced by reducing the goodwill component.

• Another positive side of the impairment is, just like depreciation, tax benefit is provided for the
written off amount from the P&L.