Subject category:
Strategy and General Management
Published by:
IBS Center for Management Research
Length: 20 pages
Data source: Published sources
Topics:
British Steel; Dutch Royal Hoogovens; Corus Group Plc; The European steel industry; Cross country mergers; Cultural mismatch; Anglo-Saxon style of management; Trade unions; Dutch Trade Union Federation; The UK steel industry; Synergies; Global steel supply and demand; World steel prices; Human resources issues in cross-border mergers; Synergies from mergers
Abstract
The case discusses in detail the various drivers that led to the merger of British Steel and Hoogovens to form a new company, Corus. It provides relevant information about the European steel industry in general and the UK steel industry in particular during the period, both before and after the merger. Corus was an attempt to revive the ailing British Steel industry, which had incurred a net loss of £81 million in the year ended 31 March 1999. Analysts pointed out that the high valuation of the British pound and stagnation in the demand for steel was gradually undermining the competitiveness of British Steel in the European market. The larger merged company was expected to meet the challenges of the increasing bargaining power of customers and the downward movement of steel prices. The Dutch partner Hoogovens sought to gain critical mass in the global metals market through synergies with its UK partner. But Corus failed to live up to market expectations. Just three years after the merger, in 2003, Corus's stock market valuation had dropped to $230 million from $6 billion in 1999. Various reasons were identified for the failure, chief among them being the cultural mismatch between the merged entities and the lack of human resources involvement when integrating the two entities. Large-scale labour unrest due to the downsizing and rationalisation of various operations seriously impacted the normal functioning of the new organisation.
Teaching and learning
This item is suitable for postgraduate courses.About
Abstract
The case discusses in detail the various drivers that led to the merger of British Steel and Hoogovens to form a new company, Corus. It provides relevant information about the European steel industry in general and the UK steel industry in particular during the period, both before and after the merger. Corus was an attempt to revive the ailing British Steel industry, which had incurred a net loss of £81 million in the year ended 31 March 1999. Analysts pointed out that the high valuation of the British pound and stagnation in the demand for steel was gradually undermining the competitiveness of British Steel in the European market. The larger merged company was expected to meet the challenges of the increasing bargaining power of customers and the downward movement of steel prices. The Dutch partner Hoogovens sought to gain critical mass in the global metals market through synergies with its UK partner. But Corus failed to live up to market expectations. Just three years after the merger, in 2003, Corus's stock market valuation had dropped to $230 million from $6 billion in 1999. Various reasons were identified for the failure, chief among them being the cultural mismatch between the merged entities and the lack of human resources involvement when integrating the two entities. Large-scale labour unrest due to the downsizing and rationalisation of various operations seriously impacted the normal functioning of the new organisation.