Tata corus mergers -----final Document Transcript

1. TATA CORUS MERGER & ACQUISITION Page 1 2. TATA CORUS MERGER & ACQUISITION Page 2 3. STEEL INDUSTRY Contribution in the development of Indias economic growth: The Indian steel industry is more than 100 years old now. The first steel ingot was rolled on 16th February 1912 - a momentous day in the history of industrial India. Steel is crucial to the development of any modern economy and is considered to be the backbone of the human civilization. The level of per capita consumption of steel is treated as one of the important indicators of socio-economic development and living standard of the people in any country. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flow and income generation. All major industrial economies are characterized by the existence of a strong steel industry and the growth of many of these economies has been largely shaped by the strength of their steel industries in their initial stages of development. India is the seventh largest steel producer in the world, employing over half a million people directly with a cumulative capital investment of around Rs. 1,00,000 crore. It is a core sector essential for economic and social development of the country and crucial for its defense. The Indian iron and steel industry contributes about Rs.8,000 crore to the national exchequer in the form of excise and custom duties, apart from earning foreign exchange of approximately Rs. 3,000 crore through exports. Consumption of finished steel grew by 5.9 % and increased to 24.9 million tones. steel consumption is likely to increase in the at a rapid pace in future due to large investments planned in infrastructure development, increase urbanization and growth in key steel sectors i.e. automobile, construction and capital goods. Since, then the Indian steel industry has emerged as one of the core sectors in the Indian economy with a very significant impact on economic growth. India with its abundant availability of high grade iron ore, the requisite technical base and cheap skilled labor is thus well placed for the development of steel industry and to provide a strong manufacturing base for the metallurgical industries. TATA CORUS MERGER & ACQUISITION Page 3 4. The deregulated Indian steel industry is performing at its peak level in almost all spheres. The total production of finished steel from April 2004 to March 2005 has been estimated to be about 383.25 lakh tones as against the production of 369.57 lakh tones during the same period last year showing an increase of 3.7 %. The most spectacular achievement has, however, been recorded in export performance. Steel has so far proved to be the single key factor responsible for industrial production and thereby, for economic growth. And it is growing from strength to strength with newer Developments--both within steel making practice as well as engineering developments, which ask for more usage of steel. So much so, that economic development has become almost synonymous with steel consumption. for producers in emerging low cost market to gain access to the market of Europe other than by acquiring a company like Corus - John Quigley (Editor, Industry Publication Steel Week) its size and largest steel producer in UK. Indias largest foreign takeover worth US$12.11billion. TATA CORUS MERGER & ACQUISITION Page 4

5. Political: In the 1920s and 1930s, when it was still called Tata Iron and Steel Company, TISCO's largely tribal workers fought pitched battles with the European or Parsi management. Work conditions and the right to organize were important rallying issues, and over the years, the company developed a reputation for union-busting, often by violent means The value of Dorabjis Expansion Program came to be appreciated only during the phase when world was reeling under the pressure of the Great Depression. The Tatas survived the depression and supplied nearly three-fourths of the countrys steel requirements. By the Second World War, Tatas production capacities had expanded enough to make their prices lower than those of steel produced in England raising them to an authoritarian position. By the 1980s, the government was clearly in control of what had come to be called the commanding heights of economy. More than 45% of output in organized industry came from the public sector as well as bank and other long-lending institution. In 1981-82, eight of the largest firms in India were in the public sector, as were 24 out of the top 30 in terms of total capital employee. In this sense it could be said that Nehrus goes when he had begun the planning process had been achieved. But this success has to be seen in the context of the fact that industrial growth rates had lagged at about 4%/annum between 1964-65 and 1975-76.This rate was in sharp contrast to what was happening in the Asian economies and in Southeast Asia. These countries had achieved consistent high growth by opening up their markets and by abandoning policies of import substitution. Indira Gandhi in her second stint as prime minister was not willing two inaugurate a new industrial policy that departed from the socialist pattern put in place by her father. Yet she was far too astute not to recognize the signs of crises that were waiting in the wings. She made the gesture that her government supports the expansion and modernization of the private sector. The basic elements of the new policy began to emerge against the background of the India Special Drawing Rights billion-dollar loan agreement with the International Monetary Fund to cope with the balance of payment deficits. TATA CORUS MERGER & ACQUISITION Page 5 6. Rajiv Gandhi- Both internal & external finance shortages were worsening. Trade deficit increased from 10 billion in 1983-84 to Rs. 34 billion in 1985-86 so it became difficult to repay loan. Economic: TATA Steel, formerly Tata Iron and Steel Company Ltd (Tisco), the company around which the entire township of Jamshedpur was built, was registered in Bombay (now Mumbai) on August 26, 1907. It had an initial capacity of 160,000 tons of pig iron, 100,000 tons of ingot steel, 70,000 tons of rails, beams and shapes and 20,000 tons of bars, hoops and rods. It also had a powerhouse, auxiliary facilities and a laboratory. It was in 1955 that Tata Steel began its two million-tone expansion programme, the largest project in the private sector at that time. The project was completed in December 1958. Beginning in the 1980s, the company undertook in various phases an ambitious modernization programme. The first phase, between 1981 and 1985, involved a total project cost of Rs.223 crores. This phase, among other things, saw the installation of two 130 tone LD converters, two 250 tone a day oxygen plants, a bar forging machine, two vertical twin-shaft lime kilns and a tardolo brick plant. Significantly, a six-strand billet caster and a 130-tone vacuum arc refining unit were installed, that too in the integrated steel plant. The second phase (1985-1992), involving a project cost of Rs.780 crores, saw for the first time in India coal injection in blast furnaces and coke oven battery with 54 ovens using stamp-charging technology. Apart from this, a 0.3 mtpa (million tone per annum) wire rod mill, a 2.5 mtpa sinter plant, a bedding and blending plant and a waste recycling plant of 1 mtpa were installed. The cost of the third phase (1992-1996) of the project was a whopping Rs.3,600 crores, and that of the fourth phase (1996-2000) Rs.1,300 crores. The company recently commissioned its 1.2 mt (million tone) capacity Cold Rolling Mill Complex at a project cost

of Rs.1,600 crores. This four-phase modernization program has enabled Tata Steel to be equipped with the most modern steel-making facilities in the world. As of today, the Tata Steel facility has a hot metal capacity of 3.8 mtpa and a crude steel capacity of 3.5 mtpa, corresponding to a salable steel capacity of 3.4 mtpa. Tata Steel has been in the forefront of India's industrialization and an engine of growth. It is part of Tata Group, a prestigious, TATA CORUS MERGER & ACQUISITION Page 6 7. family-owned Indian multinational with 2005 revenues of $17.8 billion, the equivalent of about 2.8 % of India's GDP. Tata Steel's acquisition of Corus was a marriage made in heaven. Social: Social responsiveness became integral to organizational objectives of Tata Steel, even before the company was established in 1907. In 1970, however, Tata Steel formally incorporated its commitment to the stakeholder concerns, including those of the nation, and environment, in its Articles of Association. The Company shall have among its objectives the promotion and growth of the national economy through increased productivity, effective utilization of materials and manpower resources and continued application of modern scientific and managerial techniques in keeping with the national aspirations, and the Company shall be mindful of its social and moral responsibilities to the consumers, employees, shareholders, society and the local community. For Jamsetji Tata, the progress of enterprise, welfare of people and the health of the enterprise were inextricably linked. Wealth and the generation of wealth have never "been ends in themselves, but a means to an end, for the increased prosperity of India. Tata Steels efforts at environment management are well recognized. Its Steel Works in Jamshedpur, all its mines, collieries and manufacturing divisions in its out locations are certified to ISO-14001. Jamshedpur is the only town in the country which has an ISO-14001 certified service provider. Significant achievements by the Company include an improvement in environment and resource conservation, including a reduction in green house erosion, raw materials and water consumption. The Company has increased waste reuse and recycling. The heritage of returning to society what they earn evokes trust among consumers, employees, shareholders and the community. This heritage will be continuously enriched by formalizing the high standards of behavior expected from employees and companies. The TATA name is a unique asset representing Leadership with Trust. Leveraging this asset to enhance group synergy and become globally competitive is the route to TATA CORUS MERGER & ACQUISITION Page 7 8. sustained growth and long term success. Values Trusteeship Integrity Respect for Individual Credibility Excellence. Technology: Tata Steel has been fortunate to have leaders and a rich reservoir of committed people who could see clearly through the future and transformed the plant into a modern technological giant with the power of their meticulous envisioning, strategy and planning, through several modernization programs having spent more than Rs. 70000 millions on environment-friendly technologies since 1980. Installation of a modern Cold Rolling Mill Complex, built at global speed and cost, is not only the epitome of Tata Steels modernization program, but also remains a global benchmark in project management of its kind. It is also worthwhile to mention that the Company lost dearly for their decision on the installation of EOF (Energy Optimizing Furnace) at Jamshedpur Works, and CRM (Cold Rolling Mill) at Gopalpur in Orrisa. The Tatas made a great contribution in manpower development field too. From the very beginning the Tatas invested substantial time, money and resources in training schemes. In 1921, the Jamshedpur Technical Institute was set up with a purpose to replace foreign technical experts with their Indian counterparts. Furnished with super- sophisticated labs, advanced training aids and other

infrastructural facilities, the Technical Training Institutes in Jamshedpur is today one of the best in the country. Recently, a new Management Development Centre has been built at Dimna to impart advanced management training to middle and senior level managers in the Company. a production capacity of 1, 00,000 tones, has transferred into global giant. -1990s, Tata steel emerged as Asias first and Indias largest integrated steel producer in the private sector. TATA CORUS MERGER & ACQUISITION Page 8 9. let the company gain access t major Asian markets and Australia. which

financial year 2006ore tax in the same year was Rs.64.14 billion while its profit after tax is Rs.42.22billion. -LOW COST PRODUCTION -QUALITY OF STEEL WAS NOT OF INTERNATIONAL STANDARDS -EASY ACCESS TO ROW MATERIAL -NON AVAILABILITY OF LATEST R&D -LOW EQITY DEBT RATIO FACILITY SWOT - TO BECOME A WORLD LEADER IN -TO COMPETE WITH OTHER BIG LOW COST AND HIGH QUALITY GLOBAL PLAYER STEEL PRODUCTS. Various Policies of Tata Steel: Accountability Policy

10. association including the clause of social welfare. Towards shareholders: Equal participation, straight forward business policy. Towards employees: Pioneer of P.F. scheme, free medical and workmens corporation fund. Towards Society: India should not be an economic super power, but a happy country. Towards government: Suggestions of economic reforms and high tax payer company. Towards consumers: Consumer is the king of market. Quality products & services timely solutions of problems The London-based Corus Group is one of the world's largest producers of steel and aluminium. Corus was formed in 1999 following the merger of Dutch group Koninklijke Hoogovens N.V. with the UK's British Steel Plc on October 6, 1999. It emoploys 47,300 people worldwide and 24,000 people in the United Kingdom. Corus is a leading European manufacturer providing steel and aluminium products and services worldwide. The company is comprised of four Divisions; Strip Products, Long Products, Distribution & Building Systems and Aluminium2, and has a global network of sales offices and service centres. It focuses on semi-finished and finished carbon steel products and is not involved in iron ore extraction. Corus is Europes second largest steel producer with revenues in 2005 of 9.2 billion (US$18 billion and crude steel production of 18.2 million tonnes, primarily in the UK and the Netherlands. Corus provides innovative solutions to the construction, automotive, packaging, mechanical engineering and other markets worldwide. Tata acquired corus, which is 4 times larger than its size and the largest steel producer in the U.K. The deal, which creates the worlds fifth largest steelmaker, is Indias TATA CORUS MERGER & ACQUISITION Page 10 11. largest ever foreign takeover and follow mittal steels $31 billion acquisition of rival arcelor in same year. Tata acquires 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 the first offer which was 455 pence. For the fiscal year ended March 2006, the company generated revenues of $3,693.6million (IR17,144.22 Crores), an increase of 0.1% over the previous fiscal year. The company saw a net income of $755.4 million (IR3,506.38 Crores), an increase of 8%over fiscal 2005 months.(3) SWOT ANALYSIS OF CORUS -Worlds ninth

largest and europe's second largest company. - High oprational cost - Wide range of products of high - Lack of access to raw material. technology. SWOT -To get access to raw materialand growth markets throug mergers. -Increasing losses resulting to winding up -To merger with acompany to elimanated of company. duplication and remove overlaps in marketing, accounting, etc., TATA CORUS MERGER & ACQUISITION Page 11 12. STRENGTHS:- The change in management structure due to the privatisation of the British Steel company in 1999 (which created Corus as a result of the merger of British Steel and Hoogovens) led to strengthening the manufacturing company, which, prior to the merger, had suffered serious cumulative losses between 1975 and 1984. A combination of increased investment, reduced overheads, devolved decision-making and revolutionised working practices has become the foundation of making Corus into one of Europes largest manufacturing companies as of date. The company, spearheaded by Brian Moffat since 1993, used a range of different approaches to global development such as joint ventures (Western Europe and USA), overseas transplants (USA, Eastern Europe and possibly Asia and South America); and continued exports of high-added value products in order to further strengthen their international presence in the manufacturing business. WEAKNESSES:- In the crisis-filled years that Corus suffered, critics have commented that the company has a lack of long-term vision, evidenced by their concentration on small steel ventures in the US, when all the other competitors have been making giant alliance moves in order to give them stronger market positions in developing markets. It has not used its financial strength to spread its operations globally, in this day and time when going global is a key factor to success. Poor management prior to Moffats administration has also caused the firm a not-so-good image with employees, as in 2000, they were forced to reduce their workforce due to radical restructuring of its bulk steel operations. OPPORTUNITIES:- With the observed inability of Corus to spread operations globally, the opportunity therefore is to take advantage of the increasingly boundless global market in order to not only increase profits for the company, but also to gain market leadership, because it is believed that the manufacturing company has got what it takes to take on a worldwide scale. TATA CORUS MERGER & ACQUISITION Page 12 13. They also have the opportunity to further increase their production capacities through adoption of systems which technology nowadays offers, and also to prepare for the increased demand for their products once they decided to conquer the wider international markets. The steel prices that are likely to continue to rise in the future partly as a result of the dynamic Chinese economys effect on world prices should present an opportunity for Corus to utilise to the fullest so that they could realise their true company potentials. With Philippe Varin now in the helm after Moffat announced his resignation in 2003, opportunity offered by a new organisational structure is also evident. THREATS:- The strengthening of the pound against European currencies in the second half of the 1990s created a threat for the company, since by that time much of their sales were still in Europe. It is therefore a threat to the firm at this time, when the tug against who is the stronger currency still exists in the market. There is also the threat, not only for the Corus group, but for the whole steel industry as well, of the European rules with respect to opening the market of power generation, which would mean creating an unfair distortion of competition for the industry concerned. Name: TATA Steel Formal Name: Tata Iron & Steel Company Limited Founded: 1907 Founder: Jamsetji Tata Chairman: Ratan Tata Type: Public (BSE 500470) Industry: Steel Parent: Tata Group TATA CORUS MERGER & ACQUISITION Page 13

14. Name: CORUS Founded: 1999 Formation: Merger of Bristish Steel Corporation and koninklijke hoogovens N.V CEO: Kirby Adams Type: Subsidiary Industry: Steel Parent: Tata Steel, member of TATA Group Diversified Product Mix Will Reduce Risks While Higher End Products Will Add To Bottom Line.

In World To 5th In Production Of Steel Globally.

produce High Value Stripped products. Helped TATA to feature in Top 10 players in world. Technology Benefit, Economic of scale. Corus holds number of patents and R&D facilities. TATA CORUS MERGER & ACQUISITION Page 14 15.

Technology Benefit. urated market of Europe.

Were Relatively Old With High Cost Of Production 2006 TATAs bided at 455pence per share and price per share was 390 pence at that time. final bid from Brazilian steel maker COMPANHIA SIDERUGGICA NACIONAL (CSN) OF 603 pence per share. TATA CORUS MERGER & ACQUISITION Page 15 16. TATA-Corus dealTATA STEEL UK. Immediately take over was required. ed Tata steels equity base which was not in favor of Tata shareholders. higher than that debt of around 8%, so paying in cash brings down the cost of acquisition. The CorusTata deal continues to make news, even as both the companies continue to consider various options to combine. For watchers of M&A (merger and acquisition), the deal is a case study of how Indian acquirers have to consider takeover code and other laws in a different country, such as the UK. This, apart from taking care that Indian laws are complied with. While the Indian Companies Act, 1956, usually governs mergers in India, international deals involve additional compliances with rules lay down under the FEMA TATA CORUS MERGER & ACQUISITION Page 16

US $ teels UK special Purpose vehicle named

17. (Foreign Exchange Management Act, 1999) and associated law. Further, listed companies are also subject to the rules and regulations laid down by the SEBI (Securities and Exchange Board of India). "The latter two laws can complicate any cross-border M&A," says Mr Diljeet Titus of Titus & Co, Advocates, New Delhi. "There are often occasions when an interplay between SEBI regulations and those of FEMA can make it difficult for deals to be structured. The best example is the 3(3) notice required to be given in the case of inter-se promoter acquisition under the SEBI takeover code," he says, referring to Regulation 3(3) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations. "The 3(3) notice mandates that a notice has to be given to the stock exchange where the shares of the company are listed four days prior to any inter-se promoter transfer of shares. "However, under the FEMA a non-resident can only acquire shares of an Indian company at market price." Mr Titus reasons that if the four-day notice is given to the stock exchanges, it encourages speculation on the company's share price, making it difficult for the foreign acquirer to buy the shares at market price. "Because the market price may not be the true price of the shares but just a speculative price over four days." It is possible to make M&A less painful, feels Mr Titus. "SEBI and the RBI (Reserve Bank of India) may each establish an effective legal cell, which should be able to respond to questions raised by the parties to a merger on a timely basis," he suggests. "A comprehensive database of FAQ (frequently asked questions) from these two organizations could help. For, many of the questions that arise in current deals may arise in future deals too." TATA CORUS MERGER & ACQUISITION Page 17 18. An amalgamation is regulated by the Companies Act, 1956 (CA56), and the company (Court) Rules, 1959 (Rules). A company may merge with another body corporate, whether or not an Indian company, provided the surviving entity of the merger is a company within the meaning of the CA56. A scheme of amalgamation (scheme) requires approval of the High Court (Court) of the States where the registered offices of amalgamating companies are situated. The steps for amalgamation of companies under the CA56 and the Rules are as follow: (1) Apply to the Court (by the company or any creditor or member of the company) for directions to convene a meeting of the members and/or of creditors of the company, for purposes of considering and approving the Scheme. Notice of the application must also be given to the Regional Director, Company Law Board, whose representation is considered by the Court before passing final orders. (2) Pursuant to the Courts directions the amalgamating companies would need to give 21 days notice of the meetings by advertisement in newspapers and then hold meetings fo their respective members and/or creditors, according to the dates times, venues and quorum fixed for the meetings by the Court. After approval of the Scheme by the requisite majority (1) the Chairman of each ,eeting files his meetings report with the Court. (3) Within seven days of submission of the chairmans report to the Court, a final petition is filed with the Court conforming the Scheme with a request for appropriate orders and directions by the Court. The Court fixes a date for hearing the petition and the notice of the hearing must be advertised in the newspaper(s) at least 10 days before the date fixed for the hearing. (4) While considering the Scheme, the Court considers whether the applicant has disclosed to the Court by affidavit all material facts relating to the company, such as the latest financial position of the company, any investigation proceedings pending TATA CORUS MERGER & ACQUISITION Page 18 19. by the Company Law Board and that the Scheme does not violate any provisions of law is not contrary to public policy but is fair, just and reasonable. If the Court receives no adverse representation from the Regional Director, the Court may sanction the Scheme with appropriate orders and directions necessary for its proper working, including transfer of properties or liabilities,

dissolution of the transfer company without the procedure of winding up, allotting of shares, debentures or other like interests, etc. Thereafter, the amalgamating companies are required to file the order(s) of the Court sanctioning the Scheme with their respective Registrars of Companies and, upon such filing; the order of the Court becomes effective and legally binding. This Court process takes 3 6 months. Tax Consideration: The Court order, being in effect a conveyance, is an instrument liable to stamp duty that varies from state to state. However, if (1) at least 90% of the issued share capital of the transferee company is in the beneficial ownership of the transferor company, or (2) transfer is between a parent company and a subsidiary company, one of which is the beneficial owner of not less 90% of the issued share capital of the other, or (3) transfer is between two subsidiaries where not less than 90% of the issued share capital of each is in the beneficial ownership of a common company of the other, then no stamp duty is payable, provided an exemption certificate is obtained from the officer appointed by the State Government on their behalf. The transferee company may carry forward losses incurred before the amalgamation. However, to do this at least 51% of the shareholders of the transferee company (prior to the amalgamation) should beneficially hold at least 51% of the votes on 31st March of each of the future fiscal years in which the past losses are to be carried forward. If the transferor company is carrying forward losses, then the following conditions must be met to enable the transferee company to carry forward losses of the transferor company (post-merger) TATA CORUS MERGER & ACQUISITION Page 19 20. 1. The transferee company holds continuously for a minimum period of five years from the date of amalgamation at least 75% of the book value of fixed assets of the transferor company acquired in the Scheme; 2. The transferee company continuous the business of the transferor company for a period of five years from the date of amalgamation; 3. The transferee company, owing an industrial undertaking of the transferor company by way of amalgamation, achieves the level of production of at least 50% of the installed capacity of this undertaking before the end of four years from the date of amalgamation and continues to maintain this minimum level of production till the end of five years from the date of amalgamation. However, the Central Board of Direct Taxes, on an application made by the transferee company, can in suitable cases relax the condition of achieving the level of production or the period during which it is to be achieved or both. The precondition for this is that genuine efforts are made by the transferee company to attain the prescribed level of production and there are circumstances preventing such efforts from attaining this level. 4. The transferee company furnishes to the Assessing Officer a certificate verified by an accountant, with reference to the books of accounts and other documents showing particulars of production, along with the return of income. These should relate to the assessment year relevant to the previous year during which the prescribed level of production is achieved and to subsequent assessment years relevant to the previous years falling within five years from the date of amalgamation. An acquisition may be in the acquisition of either shares or assets. While not considering the merits and acquisition of assets and the higher stamp duty on the sale of assets. 1. FIPB Approval: Under the foreign direct investment policy of the Government of India, a proposal for the acquisition of shares of an India company by a foreign company requires the prior approval of the Foreign Investment Promotion Board (FIPB). However, FIPB approval is not required for the sale and transfer of shares of TATA CORUS MERGER & ACQUISITION Page 20 21. an Indian company by a person resident outside India (not being a non-resident Indian) to another person resident outside India(not being a non-resident India), provided the transferee does

not have a previous venture or investment in India in shares or debentures or a technical collaboration or trade mark agreement in the same or allied field in which the Indian company whose shares are being acquired is engaged. 2. RBI Approval: An acquisition involving transfer of shares from a resident company/Individual to a person not resident in India requires the prior approval of the FIPB and the Reserve Bank of India(RBI). RBI approval is a two-tier process, with an in principle approval (approving the transfer of shares, inter alia, subject to the remittance of the purchase price to the resident company/individual) and thereafter a Final approval. 3. Compliance with the Securities and Exchange Board of India (SEBI) Act, 1992; Acquisition of the shares of a listed company must comply with the requirements under the SEBI act (Substantial Acquisition of Shares & Takeovers Regulations), 1997. 4. Approval of the Department of Company Affairs under CA56: An acquisition of shares in a public company or a private company which is a subsidiary of a public company (Public Company), requires the prior approval of the Department of Company Affairs (DCA), if (1) the acquirer is under the same management as the Public Company (2) the acquisition would result in the acquirer becoming the holder of more than 25% of the paid up share capital of the Public Company, (3) the acquirer is the owner of a dominant undertaking and there would be, as a result of such acquisition, an increase in the production, supply or distribution of goods produced in India or services rendered in India by the dominant undertaking, or the acquirer could, as a result of the acquisition, become the owner of a dominant undertaking. Further, a transferor holding 10% or more of the nominal value of the equity shares of the Public Company must inform the DCA before transferring one or more of such shares. In some jurisdiction, mergers and acquisitions attract significant antitrust legislation. However, in India, being a dominant undertaking does not, per se, create TATA CORUS MERGER & ACQUISITION Page 21 22. any antitrust or competition issues. Only an abuse of a dominant market position may create antitrust issues. Tax Considerations: Capital gains tax may be payable on the gains made by the seller on sale of the shares of the company. Also, to enable the transferor company to carry forward its losses, it is essential that at least 51% of the shareholders of the transferor company (prior to the acquisition) beneficially hold at least 51% of the votes on 31st March of each of the future fiscal years in which the past losses are to be carried forward. Tata acquired Corus, which is 4 times larger than its size and the largest steel producer in the U.K. The deal, which creates the worlds fifth largest steelmaker, is Indias largest ever foreign takeover and follow Mittal steels $31 billion acquisition of rival arcelor in same year. Tata acquires 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 the first offer which was 455 pence. TATA CORUS MERGER & ACQUISITION Page 22 23. Equity contribution from Tata Steel - $3.88 billion Credit Suisse leaded, joined by ABN AMRO and Deutsche provided bank in the consortium. In 2005, Tata Steel was only the world's 56th biggest steel producer and its takeover of Corus represents its first expansion outside Asia. OBJECTIVES OF MERGER & ACQUISITION The main objective of Merger & Acquisition transaction is as follows: Proper utilization of all available resources. To prevent exploitation of unutilized and underutilized assets and resources. Forming a strong human base. Reducing tax burden. Improving profits. Eliminating or limiting the competition. Achieving savings in monitoring costs. The deal (between Tata & Corus) was officially announced on April 2nd, 2007 at a price of 608 pence per ordinary share in cash. This deal is a 100% acquisition and the new entity will be run by one of Tatas steel subsidiaries. As stated by Tata, the initial motive behind the completion of the deal was not Corus revenue size, but rather its market value. Even though Corus is larger in size compared to Tata, the

company was valued less than Tata (at approximately $6 billion) at the time when the deal negotiations started. But from Corus point of view, as the management has stated that the basic reason for supporting this deal were the expected synergies between the two entities. Corus has supported the Tata acquisition due to different motives. However, with the Tata acquisition Corus has gained a great and profitable opportunity to make an exit as the company has been looking out for a potential buyer for quite some time. TATA CORUS MERGER & ACQUISITION Page 23 24. The total value of this acquisition amounted to 6.2 billion (US$12 billion). Tata Steel the winner of the auction for Corus declares a bid of 608 pence per share surpassed the final bid from Brazilian Steel maker Companhia Siderurgica Nacional (CSN) of 603 pence per share. Prior to the beginning of the deal negotiations, both Tata Steel and Corus were interested in entering into an M&A deal due to several reasons. The official press release issued by both the company states that the combined entity will have a pro forma crude steel production of 27 million tons in 2007, with 84,000 employees across four continents and a joint presence in 45 countries, which makes it a serious rival to other steel giants. The official declaration of the completed transaction between the two companies was announced to be effective by Court of Justice in England and Wales and consistent with the Scheme of Arrangement of the Tata Steel Scheme on April 2, 2007. According the Scheme regulations, Tata Steel is required to deliver a consideration not later than 2 weeks following the official date of the completion of the transaction. The process has started on September 20, 2006 and completed on July 2, 2007. In the process both the companies have faced many ups and downs. The details of this process has described below. September 20, 2006: Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer October 5, 2006: The Indian steel giant, Tata Steel wants to full fill its ambition to expand its business further. October 6, 2006: The initial offer from Tata Steel is considered to be too low both by Corus and analysts. October 17, 2006: Tata Steel has kept its offer to 455p per share. October 18, 2006: Tata still doesnt react to Corus and its bid price remains the same. October 20, 2006: Corus accepts terms of 4.3 billion takeover bid from Tata Steel October 23, 2006: The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steels bid. TATA CORUS MERGER & ACQUISITION Page 24 25. October 27, 2006: Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata. November 3, 2006: The Russian steel giant Severstal announces officially that it will not make a bid for Corus 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 November 27, 2006: The board of Corus decides that it is in the best interest of its will shareholders to give more time to CSN to satisfy the preconditions and decide whether it issue forward a formal offer 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 Offer. 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 April 2, 2007: Tata Steel manages to win the acquisition to CSN and has the full voting support form Corus shareholders s formed a seven-member integration committee to spearhead its union with Corus group. While Ratan Tata, chairman of the Tata group, heads the committee, three of the members are from Tata Steel and the other three are from Corus group. The acquisition by Tata amounted to a total of 608 pence per ordinary share or 6.2 billion (US $12 billion) which was paid in cash. First of all, the general assumption is that the acquisition was not

cheap for Tata. remium over the closing midmarket share price of Corus on 4 October, 2006 and a premium of over 68% over the average closing market share price over the twelve month period. Moreover, since TATA CORUS MERGER & ACQUISITION Page 25 26. the deal was paid for in cash automatically makes it more expensive, implying a cash outflow from Tata Steel in the amount of 1.84 billion. Corus purchase from internal company resources, meaning that more than two-thirds of the deal has had to be financed through loans from major banks. announced, Tata Steels share fell by 10.7% on the Bombay stock market. Despite its four times smaller size and smaller capacity, Tata Steels operating profit for 2006, earning $840 million on sales of 5.3 million tons, were very close in amount to those generated by Corus ($860 million in profits on sales of 18.6 million tons). financed with Corus cash flows, is expected to generate up to $640 million in annual interest charges (8% annual interest cost). This amount combined with Corus existing interest debt charges of $400 million on an annual basis implies that the combined entitys interest obligation will amount to approximately $725 million after the acquisition. acquiring Corus is most likely to be certain, since just based on the numbers alone it turns out that at the end of the bidding conflict with CSN Tata ended up paying approximately 68% above the average price of Corus shares. between experts and analysts opinions is whether this acquisition for the right move for Tata Steel in the first place. The fact that Tata has managed to acquire a British steel maker that has been a symbol of Britains industrial power and at the same time its dominion over India has been perceived as quite ironic. Only time will show whether Tata will be able to truly benefit from the many expected synergies for the deal and not make the typical mistakes made in many large M&A deal during this beginning period. TATA CORUS MERGER & ACQUISITION Page 26 27. The Companies Act Amendment Bill, which was tabled in Parliament in the Budget session that adjourned last week, has proposed to allow Indian companies to merge with overseas companies, a move that could introduce greater flexibility in cross-border merger and acquisitions (M&As). At present Sections 391-394 of the Companies Act, 1956, allow only foreign companies to merge with Indian ones. The Bill has introduced Section 205 that also allows the reverse and stipulates that payment to shareholders of listed Indian companies being merged can be in the form of cash, shares or Indian Depository Receipts (IDRs) issued by the overseas companies. The amendment was first suggested in 2005 by an expert committee on company law chaired by Tata Sons Director J J Irani. The report had stated that both contract as well as court-based mergers between an Indian company and a foreign company, where the foreign company is the transferee, needs to be recognised in Indian law. The committee recognises that this would require some pioneering work between various jurisdictions in which such mergers and acquisitions are being executed/created. If this amendment goes through, it will meet a key demand of many multinational companies investing in India. Legal experts said the merger of an Indian company with a foreign one can help structure M&A deals in many ways. For example, if an overseas company has acquired another foreign company that has a subsidiary in India, the new provision will allow the acquirer to merge the Indian operations with itself, instead of retaining it as a separate entity. TATA CORUS MERGER & ACQUISITION Page 27

28. -3 steel makers globally by 2015. The company would have an aggregate capacity of close to 56 million tons per annum, if all the planned Greenfield capacities go on stream by then. 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. www.corusgroup.com www.icmrindia.org/casestudies/catalogue/.../FINC049.htm economictimes.indiatimes.com/.../Tata-Corus.../5597493.cms www.thehindubusinessline.com www.icmrindia.org MAGAZINES The analyst TATA CORUS MERGER & ACQUISITION Page 28