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Abstract

This is the first of a two-case series (108-010-1 and 110-005-1). On 31 January 2007, Tata Steel Limited, one of the leading steel producers in India, acquired the Anglo Dutch steel producer Corus Group Plc for 8.5 billion euros. The process of acquisition concluded only after nine rounds of bidding against the other bidder for Corus - the Brazil based Companhia Siderurgica Nacional. This acquisition was the biggest overseas acquisition by an Indian company. Tata Steel emerged as the fifth largest steel producer in the world after the acquisition. The acquisition gave Tata Steel access to Corus'' strong distribution network in Europe. Corus'' expertise in making the grades of steel used in automobiles and in aerospace could be used to boost Tata Steel''s supplies to the Indian automobile market. Corus in turn was expected to benefit from Tata Steel''s expertise in low cost manufacturing of steel. However, some financial experts claimed that the price paid by Tata Steel (608 pence per share of Corus) for the acquisition was too high. Corus had been facing tough times and had reported a substantial decline in profit after tax in the year 2006. Analysts asked whether the deal would really bring any substantial benefits to Tata Steel. Moreover, since the acquisition was done through an all cash deal, analysts said that the acquisition would be a financial burden for Tata Steel. The case is structured to enable students to: (1) gain an in-depth knowledge about various corporate valuation techniques; (2) critically examine the rationale behind the acquisition of Corus by Tata Steel; (3) understand the advantages and disadvantages of cross-border acquisitions; (4) understand the need for growth through acquisitions in foreign countries; (5) study the regulations governing mergers and acquisitions in the case of a cross-border acquisition; and (6) gain insights into the consolidation trends in the Indian and global steel industries. This case is aimed at MBA / PGDBA students and is intended to be part of the finance and accounts curriculum. It includes a detailed teaching note. This case won the second prize in the John Molson Case Writing Competition 2007, organised by the John Molson School of Business, Concordia University, Montreal, Canada.
Location:
Industry:
Size:
Very large
Other setting(s):
2006-2007

About

Abstract

This is the first of a two-case series (108-010-1 and 110-005-1). On 31 January 2007, Tata Steel Limited, one of the leading steel producers in India, acquired the Anglo Dutch steel producer Corus Group Plc for 8.5 billion euros. The process of acquisition concluded only after nine rounds of bidding against the other bidder for Corus - the Brazil based Companhia Siderurgica Nacional. This acquisition was the biggest overseas acquisition by an Indian company. Tata Steel emerged as the fifth largest steel producer in the world after the acquisition. The acquisition gave Tata Steel access to Corus'' strong distribution network in Europe. Corus'' expertise in making the grades of steel used in automobiles and in aerospace could be used to boost Tata Steel''s supplies to the Indian automobile market. Corus in turn was expected to benefit from Tata Steel''s expertise in low cost manufacturing of steel. However, some financial experts claimed that the price paid by Tata Steel (608 pence per share of Corus) for the acquisition was too high. Corus had been facing tough times and had reported a substantial decline in profit after tax in the year 2006. Analysts asked whether the deal would really bring any substantial benefits to Tata Steel. Moreover, since the acquisition was done through an all cash deal, analysts said that the acquisition would be a financial burden for Tata Steel. The case is structured to enable students to: (1) gain an in-depth knowledge about various corporate valuation techniques; (2) critically examine the rationale behind the acquisition of Corus by Tata Steel; (3) understand the advantages and disadvantages of cross-border acquisitions; (4) understand the need for growth through acquisitions in foreign countries; (5) study the regulations governing mergers and acquisitions in the case of a cross-border acquisition; and (6) gain insights into the consolidation trends in the Indian and global steel industries. This case is aimed at MBA / PGDBA students and is intended to be part of the finance and accounts curriculum. It includes a detailed teaching note. This case won the second prize in the John Molson Case Writing Competition 2007, organised by the John Molson School of Business, Concordia University, Montreal, Canada.

Settings

Location:
Industry:
Size:
Very large
Other setting(s):
2006-2007

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