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Mergers - Case Study Example

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On January 31, 2007, Tata Steel Limited (Tata Steel), one of the leading steel producers in India, acquired the Anglo Dutch steel producer Corus Group Plc (Corus) for US$ 12.11 billion ( 8.5 billion). This acquisition was the biggest overseas acquisition by an Indian company…
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Download file to see previous pages The Tata Group comprises around 90 companies with total turnover of US$22 billion, equivalent of around 3 per cent of India's GDP.
Tata Steel has one of the most modern steel making facilities and is also one of the lowest cost producers of steel in the world. It has been rated as the world's best steel company for the past three consecutive years by World Steel Dynamics. World over, Tata Steel currently has a capacity of around 26 million tonnes per annum including its recent takeover of Corus and has the second largest global distribution network in 45 countries. Tata Steel which has also set benchmarks in the fields of corporate social responsibility and corporate governance firmly believes in improving the quality of life of its employees and the communities it serves. Tata Steel aspires to become a 50 Million tonne Steel Company by 2015.
It was little hard for TATA Steel to swallow Corus as CSN, a Brazilian company was also in the race. The bidding war between Tata Steel and Brazilian company CSN was riveting and ended in a rapid-fire auction. Initial reactions to the deal are highly diverse and retail investors are completely puzzled by the market reaction.
TATA Steel had announced the refinancing of its GBP 3,260 million acquisition bridge facility and revolving facility was provided by ABN AMRO and Deutsche Bank, the financing formalities were finished off by April 2, 2007. Refinancing was also arranged which amounted to GBP 3,170 million and was done by a syndicate led by Citigroup, ABN AMRO and Standard Chartered Bank. This refinancing provides significant benefits and flexibility over the term of the 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 US, 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.
The Deal Development
On October 20, 2006, Tata Steel announced that it had agreed to pick up a 100% stake in the Anglo-Dutch steel maker Corus Group at 455 p. per share in an all cash deal, cumulatively valued at GBP 4.3 billion (USD 8.04 billion).
On November 19 2006, the Brazilian steel company CSN launched a counter offer for Corus at 475 pence per share, valuing it at $8.4 billion.
On December 11 2006, Tata preemptively upped the offer to 500 pence, which was within hours trumped by CSN's offer of 515 pence per share, valuing the deal at $ 9.6 Billion. The Corus board promptly recommended both the revised offers to its shareholders.
On December 19 2006, Corus announced the following:
In the light of the competing offers for Corus by Tata Steel UK Limited ("Tata") and CSN Acquisitions Limited ("CSN"), the Company announced on 12 December 2006 that the Corus Directors intended to propose resolutions to shareholders at each of the ...Download file to see next pagesRead More
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