The acquisition of European steel company CORUS by the Indian based company TATA Steel Free essay! Download now
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The acquisition of European steel company CORUS by the Indian based company TATA Steel
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DescriptionThis assignment will focus on the acquisition of European steel company CORUS by the Indian based company called TATA Steel. A brief introduction on the companies, followed by an explanation of synergies, the goals and objectives of the acquisition and a post acquisition analysis of the enlarged entity’s performance and achievement of objectives followed by conclusions.
This assignment will focus on the acquisition of European steel company CORUS by the Indian based company called TATA Steel. A brief introduction on the companies, followed by an explanation of synergies, the goals and objectives of the acquisition and a post acquisition analysis of the enlarged entity’s performance and achievement of objectives followed by conclusions.
Tata Steel formerly known as TISCO (Tata Iron and Steel Company Limited) was established in Jamshedpur, India in 1907. It was the world’s 56th largest and India’s 2nd largest steel company with a production capacity of 3.8 million tonnes of crude steel each year. It is known to be one of the world’s lowest cost steel producers because of its high level of vertical integration and process improvisation, excellent product mix and product quality. The company is listed on the Bombay Stock Exchange and National Stock Exchange and employs about 82,700 people. (http://www.tatasteel.com)
Corus was formed in October 1999 through the merger of British Steel and Koninklijke Hoogovens. It is the 9th largest steel producer in the world and 2nd largest producer in Europe with its main operations in the UK, Netherlands, Germany, France, Norway and Belgium. It is a leading supplier to different markets around the world such as Construction, automotive, packaging, mechanical and electrical engineering, metal goods , oil and gas. Corus aims at creating value with continuous innovation and improvement by offering a wide product range and exceptional customer service. Corus employs 47,300 worldwide including 24,000 people in the UK. (http://www.corusgroup.com/en/)
Before being acquired by Tata Steel, Corus was four times bigger than Tata Steel. On the 2nd of April 2007, Tata Steel acquired Corus for a price of $12 billion making this Private sector Indian company the sixth largest steel producer in the world with a combined production capacity of 24 million tonnes of steel each year. The acquisition was a 100% leveraged buyout funded by an equity contribution of $3.88 billion from Tata steel, a debt of $5.63 billion and a revolving credit facility of $669 million. ‘A leveraged buyout can be defined as the acquisition of a business, either public or private, which is financed through a significant amount of debt, usually 80 percent and the remaining consideration financed by equity’ (Povaly, 2007).
A deal between Tata steel which is a low cost producer of steel in a rapidly developing area of the world and Corus which is known for its value added steel and strong distribution network suggests the creation of synergies which will be of tremendous strategic value to both the companies. Some of these include:
Corus will be able to keep its production costs under control due to Tata’s low production cost. Also Corus would ...
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