Tata and Corus Deal

History of the deal

Year 2002 Event CSN and Corus planned an all-shares merger Eventually deal broke up. Sept, 2006 5th Oct,2006 Decided to join hands with low-cost steel producer. Tata Steel made an offer of 455 pence a share in cash for entire shareholding . Deal Value: US$7.6 billion Corus agreed to takeover CSN made a counterbid with a price of 475 pence per share Tata Steel revised price to 500 pence per share

20th Oct, 2006 18th November, 2006 18th December, 2006

History of the deal

18th December, 2006 CSN made counter bid of 515 pence per share Corus approved this deal to meet its strategic needs Deadline set by Takeover Panel to make their final offer

30th January, 2007

31st January, 2007

Auction held Tata Steel won the auction with final bid of 608 pence per share Corus share rose by approx. 7% to 602 pence on the London Stock Exchange. Tata shares fell by Approx. 11% to Rs. 464 on BSE

Features
Tata Steel acquired Corus, which was four times its size and largest steel producer in the U.K. It is now 5th largest steel maker by capacity It is Indias largest ever trans-border acquisition Leveraged Buyout Market was harsh about the deal. Short term view was considered

Why Cash Deal

A really confident acquirer will tend to pay for the acquisition by cash and the markets historically have been rewarding this confidence by responding through rise in share value, a stock buy out could (almost certainly) take the opposite direction if they sense that the stock is Overvalued. The cash buyout also makes sure that its shareholders do not give up any merger gains to the acquired companies shareholders. Immediate takeover was required Share swap deal would have been less attractive to Corus Shareholder. Share swap deal may diluted the Tata Steel share base which was not in favor of Tata Steels share holder. Cost of acquisition Debt i.e.8% was less than cost of equity i.e.15%. Share swap deal means FDI & lot of regularity which might have not been accepted by Corus Shareholders.