Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

Tata Steel's Globalisation Strategies - The Acquisition Bid for Corus and the Strategic Fit

Abstract:

On October 17th 2006, India's largest private steel-maker, Tata Steel, bared its bold bid to acquire Anglo-Dutch steel-maker, Corus, almost five times the size of the bidder. The proposed takeover created an uproar in business circles because of the audacity of the proposed deal. If the takeover bid was to be approved by Corus' shareholders, Tata Steel would be the world's fifth largest steel producer. Various synergies – like economies of scale, strong downstream business operations, enhanced R&D, and a wide distribution network – were expected to emerge out of the deal. However, there were also many concerning issues that needed to be addressed.

As Tata Steel was preparing for the Extraordinary General Meeting scheduled on December 4th 2006 for presenting its bid to the Corus shareholders, there was an unexpected twist in the tale. On November 17th 2006, Brazilian steel-maker, CSN entered the fray. The synergies that it expected from the deal were similar to that of Tata Steel and its bid amount was larger than Tata Steel's. While Tata Steel bid Corus for $8.1 billion, CSN jacked the bid price with a 'potential offer' of $8.3 billion. A gripping scenario seemed to be in the offing, whose suspense could be solved by Corus' shareholders when they decide which company can be a better partner for growth in the long run.

Pedagogical Objectives:

• To analyse the competitive dynamics in the global steel industry and determine its critical success factors and the key result areas
• To analyse the competitive advantages of Tata Steel and its globalisation strategy
• To analyse the strategic rationale for the acquisition of Corus by Tata Steel
• To perform a comparative analysis of Tata Steel and CSN, for determining who makes a better partner for Corus
• To identify the alternative options available to Tata Steel, if the deal does not go through.

Keywords :  Mergers,Acquisitions,Alliances Case Study;Steel Industry; critical success factors; Industry Structure and competitive dynamics; Arcelor-Mittal; Nippon Steel; POSCO; Baosteel; JFE Steel; CSN; Corus; Industry Trends; China Factor; Key Result Areas; Game Theory; Vicious cycle of demand and supply imbalance; World Steel production and Consumption; Consolidation – Acquisitions and Mergers; Tata Steel; Ratan Tata; Globalisation Strategies; Organic and Inorganic growth; Rationale for Bid, Economies of Scale; access to raw materials; R&D; Strategic Fit; Financial Analysis; Cultural fit; Integration issues; Bidding war