Tata Corus Ppt - Presentation Transcript

1. MERGERS & ACQUISITION o INTERNATIONAL BUSINESS 2. Prepared By o Pankaj Hambarde (85) o MMS II o Institute of Management and Computer Studies o Thane (w) 3. o Mergers- A merger is a combination of two companies into one larger company, which involves stock swap or cash payment to the target. o Acquisition - When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. o From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded . 4. Types of mergers. o Horizontal merger o Vertical merger o Conglomeration o Market-extension merger o Product-extension merger o Product extension merger 5. WHY? o Gain market share o Economies of scale o Enter new markets o Acquire technology o Utilization of surplus funds o Managerial Effectiveness o Strategic Objective o Vertical integration 6. Why not? o Grasping for a company simply because its on the market , or because a competitor wants to buy it. o Overpayment or misguided purchase. o Inability to integrate well o Diverse Business ;Unmanageable. o Leaping without looking at the value. 7. Merger o Nokia- Siemens o A new 50-50 joint venture company is formed. o This new company will instantly become the third largest communications equipment provider in the world with annual revenues of over 15 billion Euros or more than US $30 billion

The new entity is 50-50 joint venture, called Nokia Siemens Networks and will encompass both fixed-line and mobile networking products as well as managed services offered to carriers.

8. Nokia Siemens Networks would have annual sales of close to 16 billion Euros (20 billion dollars) and a workforce of 60,000, making it number three in the sector behind Ericsson and Alcatel/Lucent; o Nokia and Siemens aim to save cash through the marriage, predicting cost reductions of 1.5bn per year by 2010. o The integration of the two businesses would also lead to job cuts mainly in Germany, with 10-15% of the combined 60,000-strong workforce - or 9,000 jobs in all - to be axed over the next four years 9. Major Acquisitions Big Deals Target Buyer Value($bn) Year Arcelor Mittal Steel 31 2006 NKK Corp Kawasaki Steel 14.1 2001 LNM Holdings Ispat Intl 13.3 2004 Tata Corus 12 2006 Krupp AG Thyssen 8.0 1997 Dofasco Arcelor 5.2 2005 Intl Steel Mittal Steel 4.8 2005 10. Acquisition o Structure o Asset Purchase o Business Purchase o Share Purchase o A Mixture o Apportionment of Risk o No Hidden matters o Remedy warranty o Indemnity 11. Acquisition o TATA-CORUS o Tata acquired Corus, which is four times larger than its size and the largest steel producer in the U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the same year. o Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence, which is 33.6% higher than the first offer which was 455 pence. 12. Acquisition Process Particulars Corus Currency: Rupee Millions TATA Steel Ltd Currency: Rupee Millions Year 2006 2005 2004 2006 2005 2004 ASSETS 582750.00 533925.00 467775.00 205,450.70 177,033.10 147,988.70 DEBTS 98100.00 105525.00 96000.00 45,932.70 42,073.10 39,982.90 LIABILITIES 231300.00 178425.00 155475.00 30492.10 33146.80 32665.90 REVENUE 760500.00 699900.00 596475.00 202,444.30 159,986.10 111,294.40 NET INCOME 33900.00 33450.00 -22875.00 37,346.20 36,032.60 17,887.80 13. Process of Acquisition o Finding A Target Business o Appointing Advisers o Negotiating terms
o

Due Diligence Exchange of Contracts Completion 14. Finding A Target Business o Synergy of Operations o Help the Organizations to Achieve Strategic Objectives o Enter new markets o Vertical Integration 15. Appointing Advisers o The Right Chemistry o The Right Experience o Size is not Everything o Talk Your Language CORUS TATA J P MORGAN ABN AMRO CAZENOVE DEUTSCHE BANK HSBC STANDARD CHARTERED 16. Negotiating Terms o The nature of the fit o Commonality of client base o Financial strength o Strategic intent o Sharing of resources o Applicable Benefits 17. Negotiation By Tata o September 20, 2006 : Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer o October 5, 2006 : The Indian steel giant, Tata Steel wants to fulfill its ambition to Expand its business further. o October 6, 2006 : The initial offer from Tata Steel is considered to be too low both by Corus and analysts. o October 17, 2006 : Tata Steel has kept its offer to 455p per share. o October 18, 2006 : Tata still doesnt react to Corus and its bid price remains the same. o October 20, 2006 : Corus accepts terms of 4.3 billion takeover bid from Tata Steel o October 23, 2006 : The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steels bid. 18. o October 27, 2006 : Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata. o November 3, 2006 : The Russian steel giant Severstal announces officially that it will not make a bid for Corus o November 18, 2006 : The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475p per share

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December 18, 2006 : Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazil's CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel's o Offer. o January 31, 2007 : Britain's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash o April 2, 2007 : Tata Steel manages to win the acquisition to CSN and has the full voting support from Corus shareholders 19. Taxation and Accountancy Considerations o Tension between Acquisition / sale of shares or assets. o Due Diligence o Tricky areas o Accounting issues o Accounting policies of the Target o Accounting for Goodwill o Fair value accounting o Earnings per share o Other Matters 20. Legal Documentation o Share sale Agreement o The shares being sold o The Price o Restrictive Agreements o Warranties o Conditions to the Deal o Transferring tangible assets o Transferring Intangible assets o Transferring Liabilities o Transferring Employees 21. Legal Documentation o The Tax Deed o The Disclosure Letter 22. Financing the Deal o TATA- CORUS Deal - $12 billion o Equity Contribution from Tata Steel- $3.88 billion o Credit Suisse leaded, joined by ABN AMRO and Deutsche Bank in the consortium. o Of the $ 8.12 billion of financing , Credit Suisse provided 45% and ABN AMRO and Deutsche provided 27.5% each. 23. DEVELOPING A POST-ACQUISITION STRATEGY: o The first 100 days o In-house systems synergy 24. First 100 Days: Conflict Points o Time Factor o Leadership style differences

Whos in charge? (Who won?) Organic vs. bureaucratic cultures Open vs. closed communication Decision making speed & style Structures that dont match 25. In-house systems synergy Operational Excellence (low cost producer) Product Leadership (best product) Customer Intimacy (best total solution) 26. Strategy: Disciplines, Priorities o Operational Excellence o Competitive price o Error free, reliable o Fast (on demand) o Simple o Responsive o Consistent information for all o 'Once and Done' o Product Leadership o New products or services o Risk takers o Meet volatile customer needs o Never satisfied - obsolete own and competitors' products o Learning organization o Customer Intimacy o Easy to do business with o Have it your way (customization) o Market segments of one o Proactive, flexible o Relationship and consultative selling o Cross selling 27. Post M & A 4 Wheels Model Culture Business Objective M&A Strategy Structure Resources Leadership Person 28. Global Steel Ranking: (Ranking of Tata steel before deal- 55) Company Capacity (in million 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 29. Conclusion o With Corus in its fold, Tata Steel can confidently target becoming one of the top3 steel makers globally by 2015. The company would have an aggregate capacity of close to 56 million tones per annum, if all the planned Greenfield capacities go on stream by then. o We can conclude that if the acquisitions well planned , Executed and the necessary precautions taken for the deal a company can achieve its strategic objectives and thus ensure its growth through Acquisition. 30. o THANK YOU
o o o o o

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