INTRODUCTION Tata Steel, an Indian integrated steel producer, created global headlines when it acquired the Anglo-Dutch steel

major, Corus Group Ltd. for $ 12.1 Billion, on January 30, 2007. Corus was four times the size of Tata Steel and the largest steel producer of UK. The deal was roughly the same size as the total outbound acquisitions by all Indian companies in the past five years combined. The deal created fifth largest steelmaker of the world31. The deal took place months after another Indian led Steel major Mittal Steel acquired Arcelor Steel for $ 33.1 Billion, creating the worlds largest steel making company. Tata Steel was 56th largest steel producer in the world with an annual crude steel production capacity of 6.8 Million Ton Per Annum (MTPA) with revenue of around $ 5 Billion in 2006-0732. Tata Steel`s Jamshedpur (India) Works had a crude steel production capacity of 6.8 MTPA which was slated to increase to 10 MTPA by 2010. The Company also had proposed three Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a Greenfield project in Vietnam. Corus was Europe's second largest steel producer with annual revenues of around 12 billion ($ 21.3 Billion) and a crude steel production of 18 MTPA, primarily in the UK and the Netherlands33. Corus was a leading supplier to many of the most demanding markets around the world including construction, automotive, packaging, and mechanical & electrical engineering, metal goods, and oil & gas. STRATEGIC RATIONALE FOR THE DEAL Corus had steel production capacity of 18 million ton per annum. Combined with the existing production capacity of Tata, it came to around 23.5 mtpa which would make the combined entity fifth largest producer of steel in the world from Tatas previous 56th position. This increase in scale would give Tata immense increase in bargaining power with both suppliers and customers. Tata Steel was a very profitable entity but extremely small in size. To expand organically by 18 mtpa, would take at least 5-8 years and would entail immense execution risk. The cost of establishing a production facility of size of Corus would be 65-70% more than the cost of acquisition34. The brand value that Corus had would be even harder to replicate in such a small time interval. This means that the replacement value of Corus was very high. Tata Steel was extremely localized in its market and would have to fight hard to get a place in the European markets that were already competitive. Corus in one shot would make Tata Steel capable of competing in the profitable European steel market. Corus had an extremely wide distribution system already put in place in entire Europe. Most of the clients of Corus were dedicated giving higher flexibility in pricing.

The technology needed for low end steel production is very different than what is necessary to produce high end value added products. Tata Steel was not technologically advanced and needed to get the advanced technology for value added products to increase the margins. Corus on the other hand was equipped with highly sophisticated technology, had many patents and a research facility and was already in to production of the value added products. The deal would allow Tata Steel to get the technical knowhow and improve the steel production in its existing facilities and the future Greenfield project that would come up. In the third quarter ended September 2006, Corus had clocked an operating margin of 9.2 percent compared with 32 per cent by Tata Steel for the third quarter ended December 200635. In effect Tata Steel was taking over a business with much lower operating margin which provided a lot of scope for improvement in short term. Tata Steel had high Tobins Q and it was taking over a company with low Tobins Q and hence would create a higher value than the reverse takeover. In the long run, there would be considerable scope to restructure Corus' high-cost plants at Port Talbot, Scunthorpe and the slab-making unit at Teesside. The employee costs of Corus were also much higher than Tata Steel; this too could be an area of restructuring in long run36. From Coruss point of view, the deal was essential to reduce its billion pound debt load. This would give it flexibility to counter the dynamic scenarios and future slowdowns. Further, Tata Steel also had access to cheaper Iron ore which would be an added advantage to Corus. Tata Steel had a well-developed distribution network in developing countries. Corus would get a market for its value added products through this distribution system. Further all production facilities of Corus were old and had high cost of production and employees. DEAL STRUCTURE Tata Steel proposed to infuse USD 4.1 billion as equity to part finance the transaction37. The equity would comprise of USD 700 million from internally generated cash, USD 500 million of external commercial borrowings, USD 640 million from the preferential issues of equity shares to Tata Sons Ltd. in 2006-07 and 2007-08, USD 862 million from a rights issue of equity shares to the shareholders, USD 1000 million from a rights issue of convertible preference shares and about USD 500 million from a foreign issue of equity-related instrument (Exhibit 3).

At the Board Meeting held on 17th April, 2007, Tata Steels Board approved the long term funding arrangement for the acquisition of Corus as per details given above. ARBITRAGE OPPORTUNITY

As soon as the intensions of Tata Steel became clear about all cash leveraged buyout of Corus Group Plc., Arbitrageurs pounced at this opportunity raising the price of the anticipated buyout. Trading activity picked up even before the announcement as speculation of such a takeover permeated the securities markets. The expected price of the deal was around 455 pence on October 17, 2006. The buyout offer represented an 11% premium to the three month average and almost a 25% premium to the share price on September 25, 2006, the day before Corus made it public that it was in advanced stages of negotiation with potential buyers. On November 19, 2006, Brazilian steel company CSN launched a counter offer for Corus at 475 pence per share valuing the company at $ 8.4 Billion. This made it clear to the arbitrageurs that a bid war is expected and they raised the price of shares to 495.5 pence (higher than the actual bid) (Refer Exhibit 5 for Corus Group Plc Share price). The counter bid by CSN lead to increase in bids sequentially by Tata and CSN to 500 pence and 515 pence subsequently on December 11, 2006 (For a detailed timeline refer to Exhibit 6). By the end of the day of the announcement of final deal at 608 pence i.e. January 31, 2007, the stock price closed at 607 pence and continued to trade in this vicinity till the consummation of deal. Of course, if the deal did not go through due to problems in getting shareholder approval or regulators permit, the stock price would probably have returned to September 2006 levels. However, if the deal

went through as proposed the arbitrageurs would have made a 67.03% return in the few months time between deal announcement and consummation. This gap in case of Tata Corus deal was October 20, 2006 to January 31, 2007 i.e. 241.3% annual (Refer Exhibit 7 for the actual profit and loss in case an arbitrage position was set up).

EXIBIT F CORUS STEEL EXHIBIT F1: ACQUISITION FINANCING FINACING (TATA STEEL AR FY08) Financing Structure The financing structure of Corus transaction has been reorganized to achieve fiscal unity in the Netherlands and consequent tax efficiencies. The financing structure of Corus as on date is given below:

Funding Structure: The bulk of the financing for the Corus acquisition has now been completed with all the bridge funding having been paid of through a mix of debt, equity and internal accruals. The funding structure as on 31st march is as follows:

The sources of the contribution towards equity capital included the following: Tata Steel Asia holdings Pte. Ltd. and Tulip UK holdings (No.1) limited drew down GBP 2.21 billion of bridge loans. These loans were repaid using monies infused by Tata Steel Ltd. out equity issues, CARS and loans as described below and also out of internal generation. The company had allotted to Tata Sons, on a preferential basis, 27 million ordinary shares (at a price of Rs. 516 per share) and 28.5 million warrants subscribing to an equal amount of ordinary shares.

Tata Sons fully exercised the warrants and 28,500,000 ordinary shares were issued to Tata Sons at a price of Rs. 484.27 per share, for total proceeds to the Company of Rs.1,380 crores. The Company issued USD 0.875 billion of 1% Foreign Currency Convertible Alternative Reference Securities (CARS). The CARS accrue interest on the outstanding principal amount at a rate equal to 1% per annum and are classified as unsecured debt on the balance sheet of the Company. Between 4th September, 2011 and 6th August, 2012, each security is convertible at the option of holder of the security, at a conversion price of Rs. 758.10 per share into a Qualifying Security issued by the Company. The Company must redeem all outstanding CARS principal amount together with accrued and unpaid interest no later than 5th September, 2012 .

The Company entered into a loan agreement with the State Bank of India and other banks for Rs. 9,500 crores. In January 2008 Rs. 9,000 crores was repaid with proceeds from the Companys Rights Issue and Rs. 500 crores was repaid on 28th February, 2008. In November 2007, the Company made a rights issue offering shareholders in India, (i) 1 ordinary share for every five ordinary shares at a price of Rs. 300 per share and (ii) 9 cumulative compulsorily convertible preference shares (CCPS) for every 10 ordinary shares at a price of Rs. 100 each. A total of 121,611,464 ordinary shares and 547,251,605 were allotted pursuant to the rights issue. Every six CCPS issued will be automatically converted into one ordinary share of the Company on 1st September, 2009. Total proceeds from the rights issue aggregated Rs. 9,121 crores. In January 2008, the Company used the proceeds from the rights issue to repay the loan from the State Bank of India described above

In addition, the non-recourse long term debt (at Tata Steel UK) was syndicated. GBP 3.12 billion of Bridge Funding was drawn in full into Tata Steel Netherlands as borrower Based on its assessment of the appropriate quantum of debt that could be serviced by Corus, the Company restructured the initial higher cost inflexible leveraged debt financing consisting of loans and bonds. This even involved a change in the financing banks. The replacement financing package consisting solely of lower cost pre-payable corporate term loans offered substantial savings and benefits to the company. This was a GBP 3.670 billion senior facility consisting of multiple tranches of term loans and a GBP 0.5 billion five year revolving credit facility. These facilities are secured by the assets of Corus.

EXIBIT F2: Timeline of events during the deed:

EXIBIT F3: Stock Price Movement: