Tata Corus acquisition

From Wikipedia, the free encyclopedia This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2008) On 20 October 2006 the board of directors of Anglo-Dutch steelmaker Corus accepted a $7.6 billion takeover bid from Tata Steel, the Indian steel company. The following months saw a lot of negotiations from both sides of the deal. Tata Steel's bid to acquire Corus Group was challenged by CSN, the Brazilian steel maker. Finally, on January 30, 2007, Tata Steel purchased a 100% stake in the Corus Group at 608 pence per share in an all cash deal, cumulatively valued at USD 12.04 Billion. The deal is the largest Indian takeover of a foreign company and made Tata Steel the world's fifth-largest steel group.

Contents
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1 The involved companies 2 Synergies between the two companies 3 Counter bid by CSN 4 Proposed funding of the deal 5 The deal 6 Timelines o 6.1 Final deal structure o 6.2 New Board formulation o 6.3 Strategic and Integration Committee 7 See also 8 References 9 External links

[edit] The involved companies

'Tata Steel', formerly known as TISCO (Tata Iron and Steel Company Limited), was the world's 56th largest and India's 2nd largest steel company with an annual crude steel capacity of 3.8 million tonnes. It is based in Jamshedpur, Jharkhand, India.[1][2] It is part of the Tata Group of companies. Post Corus merger, Tata Steel is India's second-largest and second-most profitable company in private sector with consolidated revenues of Rs 1,32,110 crore and net profit of over Rs 12,350 crore during the year ended March 31, 2008.[3][4]. The company was also recognized as the world's best steel producer by World Steel Dynamics in 2005. The company is listed on BSE and NSE; and employs about 82,700 people (as of 2007).

Corus was formed from the merger of Koninklijke Hoogovens N.V. with British Steel Plc on 6 October 1999. It has major integrated steel plants at Port Talbot, South Wales; Scunthorpe, North Lincolnshire; Teesside, Cleveland (all in the United Kingdom) and IJmuiden in the Netherlands. It also has rolling mills situated at Shotton, North Wales (which manufactures Colorcoat products), Trostre in Llanelli, Llanwern in Newport, South Wales, Rotherham and Stocksbridge, South Yorkshire, England, Motherwell, North Lanarkshire, Scotland, Hayange, France, and Bergen, Norway. In addition it has tube mills located at Corby, Stockton and Hartlepool in England and Oosterhout, Arnhem, Zwijndrecht and Maastricht in the Netherlands. Group turnover for the year to 31 December 2005 was 10.142 billion. Profits were 580 million before tax and 451 million after tax.

[edit] Synergies between the two companies

There were a lot of apparent synergies between Tata Steel which was a low cost steel producer in fast developing region of the world and Corus which was a high value product manufacturer in the region of the world demanding value products. Some of the prominent synergies that could arise from the deal were as follows :

Tata was one of the lowest cost steel producers in the world and had self sufficiency in raw material. Corus was fighting to keep its productions costs under control and was on the look out for sources of iron ore. Tata had a strong retail and distribution network in India and SE Asia. This would give the European manufacturer a in-road into the emerging Asian markets. Tata was a major supplier to the Indian auto industry and the demand for value added steel products was growing in this market. Hence there would be a powerful combination of high quality developed and low cost high growth markets There would be technology transfer and cross-fertilization of R&D capabilities between the two companies that specialized in different areas of the value chain There was a strong culture fit between the two organizations both of which highly emphasized on continuous improvement and ethics. Tata steel's Continuous Improvement Program Aspirewith the core values :Trusteeship,integrity,respect for individual, credibility and excellence. Corus's Continuous Improvement Program The Corus Way with the core values : code of ethics, integrity, creating value in steel, customer focus, selective growth and respect for our people.

[edit] Counter bid by CSN

In November 2006,Brazilian steel marker Companhia Siderrgica Nacional (CSN)challenged Tata Steel's proposal for acquisition. They countered Tata Steel's offer of 455 pence per share by offering 475 pence per share of Corus.

[edit] Proposed funding of the deal

Tata surprised the credit default swap segment of the derivative markets by deciding to raise $6.17bn of debt for the deal through a new subsidiary of Corus called 'Tata Steel UK', rather than by raising the debt itself. Tata's security credit rating is investment grade, whereas the new subsidiary may not be. The higher risk associated with raising debt through a subsidiary with a lower credit rating prompted Fitch Ratings to downgrade its rating of the credit swap risks in the takeover to 'negative'. Fitch also stated that Corus' responsibility for the debt may lead to Corus' own unsecured debt rating being downgraded. This does not affect the rating of bonds issued by Corus which are secured debt.

[edit] The deal

This section requires expansion. On January 31, 2007, following the lack of agreement on an offer, an auction process was triggered. Following the conclusion of the auction process (at an unprecedented length of nine rounds) conducted by the Panel in accordance with Rule 32.5 of the Code (the "Auction"), Tata Steel announced the proposed acquisition of Corus Group at 608p per share, that being 5p more than CSN's top offer of 603p. The final valuation of Corus was thus put at $12.04 Billion.

[edit] Timelines

On October 20, 2006, Tata Steel announced that it had agreed to pick up a 100% stake in the Anglo-Dutch steel maker Corus at 455 pence per share in an all cash deal, cumulatively valued at GBP 4.3 billion (USD 8.04 billion). On November 19, 2006, the Brazilian steel company CSN launched a counter offer for Corus at 475 pence per share, valuing it at $8.4 billion. On December 11, 2006, Tata preemptively upped the offer to 500 pence, which was within hours trumped by CSN's offer of 515 pence per share, valuing the deal at $ 9.6 Billion. The Corus board promptly recommended both the revised offers to its shareholders. On December 11, 2006, CSN announced a formal offer for the Company at an offer price of 515 pence per Corus Share , valuing the deal at $ 9.6 Billion.. The CSN Acquisition would also be implemented by way of a scheme of arrangement and is subject to a precondition that either Corus Shareholders reject the Tata Scheme or the Tata Scheme is otherwise withdrawn by Corus or lapses. The Corus board promptly recommended both the revised offers to its shareholders. Also on December 19, 2006, UK Watchdog the Panel on Takeovers and Mergers announced that the last date for each of Tata and CSN to announce revised offers for the Company, should they wish to do so, is 30 January 2007. They also warned that it would begin an auction procedure if the two remained in competition.

On January 31, 2007 Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at $11.3bn

[edit] Final deal structure

$3.53.8bn infusion from Tata Steel ($2bn as its equity contribution, $1.51.8bn through a bridge loan) $5.6bn through a LBO ($3.05bn through senior term loan, $2.6bn through high yield loan)

[edit] New Board formulation

A new board was formulated with representation from both the companies to provide a common platform for strategy and integration.

Mr. R.N. Tata will be the Chairman of Tata Steel and Corus Mr. Jim Leng will be the deputy chairman of Tata Steel and Corus Mr. B Muthuraman, Mr. Ishaat Hussain and Mr. Arun Gandhi to join the Corus board

Strategic and Integration Committee

A 'Strategic and Integration Committee' was formulated to develop and execute the integration and further growth plans. Appropriate cross functional teams were formed under this committee to look into specific issues.

Tata Tea buys Tetley of UK for 271 mn pounds

ENS ECONOMIC BUREAU

MUMBAI, FEB 27: In the biggest-ever deal in Indian corporate history, Tata Tea signed a 271 million pounds (Rs 1,870-crore) deal to buy out all the brands of Tetley of UK on Sunday. The deal structure will involve the creation of a 100 per cent Tata Tea subsidiary which will act as a special purpose vehicle to hold all Tetley properties. The Tetley deal is the largest cross-border acquisition by any Indian corporate. It is also the first instance of an Indian company breaking the domestic mould and going international in a big way. The previous largest deal in Indian corporate history was the Rs 1,065-crore PowerGen deal to buy a 46 per cent stake in Gujarat Torrent, followed by the Rs 1,030 crore acquisition of Gridco distribution network in Orissa by BSES. Tata Group chairman Ratan Tata said it was a momentous occasion for the Tatas as this was the largestever acquisition by an Indian company abroad in terms of acquiring an international brand. ``It is a bold move and I hope that other Indian corporates will follow,'' he said. The acquisition of Tetley, which has sales of Rs 1,900 crore, will be financed with 70 million pounds of equity of which 60 million pounds would be from TTL and 10 million pounds from its New York-based subsidiary, Tata Tea Inc.

TTL vice-chairman R K Krishna Kumar said its GDR issue of 45 million pounds, which is presently underway, would part-finance the equity component. The debt component of 20 million pounds would be raised through instruments like subordinate vendor loan notes and debt offerings arranged by Rabo Bank, which acted as the financial and strategic advisor as well as sole lead manager for this transaction, he said. Tata Tea has already obtained permission for the GDR float, and the remaining 230 million pounds in debt has been tied up through a structure of instruments. Tata Tea's acquisition of Tetley is expected to provide the company access to markets in North America, Europe and Australia. Exports account for 2025 per cent of Tata Tea's turnover. Tata Sons director N A Soonawalla, who is also the deputy chairman of TTL, said the venture capitalists, who presently own the Tetley brands and wanted to exit from the business, have given a loan of 21 million pounds to the Tatas, which the latter would repay within 12 months as it was a high cost loan. He said the GDR pricing would be decided after the roadshow and would be listed on the London and Luxembourg stock exchanges. The combined turnover of Tetley and Tata Tea works out to Rs 2,800-2,900 crore. Tetley UK is the world's largest market for tea bags. Tetley's major products include black tea (made from leaves that are fully oxidised or fermented), orange pekoe, dripless Tetley drawstring tea bags, and teas with various flavours like black currant, strawberry, lemon, apple and cinnamon. It also offers an extensive array of fullbodied herbal teas. The structure of the deal will ensure that while the additional funding costs do not have a bearing on the Tata Tea balance sheet, the tea major is in a position to reap all the benefits that this international brand will bring to the group. The present senior management of Tetley at UK would continue while at the board of directors level there would be induction from the Tatas. Kumar said the Tata group ``has total confidence in the Tetley management, which will be retained with such involvement from TTL as may be required. Tetley enjoys a global number two position in the tea bag market as it sells almost entirely in the form of teabags. India produces 805 million tonne of tea and the per capita consumption is 600 grams, less than Pakistan. ``If it goes up by 300 grams then we have to think of imports,'' he added. On acquiring tea estates in India and abroad now that Tetley has been acquired, Kumar said ``we are looking at opportunities.'' Copyright 2000 Indian Express Newspapers (Bombay) Ltd.

Tetley
From Wikipedia, the free encyclopedia For other uses, see Tetley (disambiguation). This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed.
(September 2011)

Tetley

Type Industry Founded Founder(s) Parent Website

Private Tea 1837 Joseph and Edward Tetley Tata Group tetley.com

Tetley, a wholly owned subsidiary of Tata Global Beverages (formerly Tata Tea ), is the world's second largest manufacturer and distributor of tea. Owned by India's Tata Group, Tetley's manufacturing and distribution business is spread across 40 countries and sells over 60 branded tea bags. It is the largest tea company in the United Kingdom and Canada and the second largest in the United States by volume. After Tetley was purchased by the Tata Group in 2000, most of its business in Asia was integrated with Tata Tea and the company planned to completely integrate its worldwide business with Tata Tea by 2006. The new group, Tata Tea Group, later renamed Tata Global Beverages, is the second largest manufacturer of tea in the world after Unilever.[1][2]

Contents
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1 History 2 See also 3 References 4 External links

[edit] History

Tetley tea canister from Canada

In 1822, two brothers, Joseph and Edward Tetley, started to sell salt from a pack horse in Yorkshire.[3] They started to sell tea as well and became such a success that they set up as tea merchants, "Joseph Tetley & Co.", in 1837. They relocated to London in 1856 and set up "Joseph Tetley & Company, Wholesale Tea Dealers". Tetley was the first company that launched tea in tea-bags in the United Kingdom in 1953.[4] The Tetley Group was created in July 1995 as a result of a buy-in management buy-out, when a group of investors bought what was then the worldwide beverage business from Allied Domecq. The Tetley Group was purchased by India's Tata Group in February 2000 for 271m.[5] It was one of the largest overseas acquisitions by an Indian company at that time. Tata Group is one of India's business conglomerates which encompass more than 90 companies including Tata Global Beverages. The acquisition has greatly helped Tata's business ambitions to hold a global tea company. As India continues to reduce import duties on tea, Tata Global Beverages has been able to offset its reduced share of the domestic market by its gains in Europe and North America. In 1952, in an early example of cross-promotion, Petula Clark's single "Anytime Is Tea-Time Now" was used to advertise Tetley on Radio Luxembourg.

Abstract:
In June 2008, India-based Tata Motors Ltd. announced that it had completed the acquisition of the two iconic British brands - Jaguar and Land Rover (JLR) from the US-based Ford Motors for US$ 2.3 billion. Tata Motors stood to gain on several fronts from the deal. One, the acquisition would help the company acquire a global footprint and enter the high-end premier segment of the global automobile market. After the acquisition, Tata Motors would own the world's cheapest car the US$ 2,500 Nano, and luxury marquees like the Jaguar and Land Rover. Though there was initial skepticism over an Indian company owning the luxury brands, ownership was not considered a

major issue at all. According to industry analysts, some of the issues that could trouble Tata Motors were economic slowdown in European and American markets, funding risks, currency risks etc.

Issues:
Understand the role of acquisition as a growth strategy. Examine Tata Motors' inorganic growth strategy. Examine the rationale behind Tata Motors' acquisition of Jaguar and Land Rover. Understand the advantages and disadvantages of cross-border acquisitions. Understand the need for growth through acquisitions in foreign countries.

Contents:
Page No. Acquisition of British Icons British Marques under Ford Ford Sells JLR The Deal The Benefits The Challenges The Road Ahead Exhibits 1 2 4 5 6 7 8 10

Keywords:
Tata Motors, Ford, Jaguar, Land Rover, JLR, Merger Synergies, Acquisition, Acquisition Structure, Global automobile market, Sub-prime crisis, Automobile Brands, Cross Border Acquisition, Special Purpose Vehicle, Merger Integration, New Products Pipeline

Excerpts

British Marques under Ford

Ford Motors Company (Ford) is a leading automaker and the third largest multinational corporation in the automobile industry. The company acquired Jaguar from British Leyland Limited in 1989 for US$ 2.5 billion. After Ford acquired Jaguar, adverse economic conditions worldwide in the 1990s led to tough market conditions and a decrease in the demand for luxury cars. The sales of Jaguar in many markets declined, but in some markets like Japan, Germany, and Italy, it still recorded high sales. In March 1999, Ford established the PAG with Aston Martin, Jaguar, and Lincoln. During the year, Volvo was acquired for US$ 6.45 billion, and it also became a part of the PAG...

Ford Sells JLR

In September 2006, after Allan Mulally (Mulally) assumed charge as the President and CEO of Ford, he decided to dismantle the PAG. In March 2007, Ford sold the Aston Martin sports car unit for US$ 931 million. In June 2007, Ford announced that it was considering selling JLR...

The Deal
On March 26, 2008, Tata Motors entered into an agreement with Ford for the purchase of JLR. Tata Motors agreed to pay US$ 2.3 billion in cash for a 100% acquisition of the businesses of JLR. As part of the acquisition, Tata Motors did not inherit any of the debt liabilities of JLR - the acquisition was totally debt free...

The Benefits
Tata Motors was interested in acquiring JLR as it would reduce the company's dependence on the Indian market, which accounted for 90% of its sales. The company was of the view that the acquisition would provide it with the opportunity to spread its business across different geographies and across different customer segments...

It is now official, Tata Motors owns both the Jaguar and Land Rover brands. Ford has handed over the rights to both brands in a ceremony held at Jaguar Land Rover headquarters in Gaydon, UK. At the ceremony Mr. Ratan Tata, Chairman of Tata Sons and Tata Motors, Don Leclair, Executive Vice President and CFO of Ford, and Lewis Booth, Executive Vice President of Ford and responsible for Ford Europe were present. David Smith will be the new CEO at Jaguar Land Rover. Mr. Tata said, This is a momentous time for all of us at Tata Motors. Jaguar and Land Rover are two iconic British brands with worldwide growth prospects. He continues to say that both British brands will retain their own unique identities and that Tata will give its full support in order to grow prosper. Tata Motors has eventually paid USD 2.3 billion in cash while Ford has contributed USD 600 million to the Jaguar Land Rover pension plans, leaving Ford with USD 1.7 billion. Ford and Tata have agreed on long term cooperation plans in regards to the supply of engines, stampings and other components to Jaguar Land Rover.
Source: Tata Motors

Read more: http://www.worldcarfans.com/10806041083/tata-completes-jaguar-land-roveracquisition#ixzz1bD7paPxV

Tatas Jaguar acquisition and Ferrari ride

Posted at July 18th, 2007 under Auto News, Auto Stocks | Print This Post in depth analysis on TATA acquistion of Fords Jaguar and Land Rover Tata group which is responsible for Indias biggest foreign takeover, by acquiring the British steel company Corus through his Tata Steel business for 6.7bn earlier this year, is now reckoning for another big acquisition, this time for its automotive division. Tata Motors is in the early stages of evaluating a bid for the Jaguar and Land Rover reported British daily The Telegraph.. Ratan Tata is understood to have instructed advisers in the past fortnight to begin evaluating the merits of a joint offer for Jaguar and Land Rover, which have been earmarked for disposal by struggling American car giant Ford. People close to the situation last night said that Tata Motors evaluation of a bid was at an exploratory stage and may not lead to a formal bid for the two brands. One person familiar with the position said that Tata Motors had signed a confidentiality agreement with Ford in recent days. .Besides Tata, other car makers from middle east and eastern car manufacturers may be interested in bidding, while a formal auction would also be likely to attract private equity firms such as Apollo, Blackstone and Cerberus ( theUS buyout firm which acquired Chrysler earlier this year for $7.5bn). Price of the luxury brands:

Analyst believe anything between $2.5bn to $3bn for jaguar and Land Rover. Here is their words A Meryll Lynch analysts suggest that Jaguar and Land Rover may fetch about $1.5bn (735m). Earlier a private equity firm called Alchemy Partners was said to be lining up a 3bn offer for the two luxury brands. If you look at the financial position, [Jaguar and Land Rover] are worth some $1bn to $1.5bn, Mr Dorris an analyst said. Add a control premium, and the final sales price could come in at about $2.5bn. Ford bought Jaguar for 1.6bn in 1989 and it is believed that Ford have invested about $10bn in Jaguar since it bought, Ford bought the Land Rover from BMW for 1.7bn in 2000. What may hamper Tatas?

Union leaders of both Jaguar and Land Rover have already raised concerns about their job security because of the sale. Jaguars sales were down nearly 32 percent for 2006 in the United States, the companys largest market. Jaguar lost more than $715 million last year and is expected to lose $550 million in 2007. According to the analysis, Jaguar is projected to lose more than $300 million in 2008 and is not expecting a profit for several years. These losses are mainly because of extremely high manufacturing costs in Britain and Ford has not earn a profit from jaguar since it bought. Land Rover sold a record 192,500 vehicles in 2006 and is said to be profitable. Unlike the jaguar, Land Rover is a much stronger and more profitable business but Tatas has to buy both the units since the products and manufacturing of vehicles for Land Rover and Jaguar is so intertwined.. The worried jaguar s workers, they told if the two companies are sold together, then there was no guarantee that a new owner would not shut down most of Jags manufacturing capacity.

Official Words from Tata and Ford A spokesman for Tata Motors said the group did not comment on speculation about mergers and acquisitions. Though Ford denied it, Ford had told that it was still some way from doing a deal, it also added hat it had been looking at its options for a year, and that it was neither setting a timeframe for any decision, nor ruling out any options. is Mahindra in the race? Mahindra & Mahindra (M&M) might also show interest in these brand. M&M which wants to be global SUV maker should have an interest, at least, in Land Rover, says the brand is attractive. Even so, it will not help Mahindra become an independent global sports utility vehicle, or SUV, brand. Moreover, Land Rover, which is about six times as big as M&M, might simply be unaffordable. I do not know what is on offer, whether it is the whole brand, or some products or what plants are being offered. I cannot say if it is a strategic fit or not. Mahindra is a SUV brand and Land

Rover is an SUV brand. So, the two brands have something where synergy is possible. But having said that, its a big company, said Pawan Goenka, President-Automotive Sector, Mahindra & Mahindra. European car manufacturers Renault and Fiat have recently ruled out of the possibility of bidding for Jaguar and Land Rover.Ford the struggling auto giant: Ford which has become struggling automaker in recent years posted a full-year 2006 net loss of $12.7 billion, the largest single-year loss in the companys history. Also Ford lost its No. 2 ranking worldwide to Japans Toyota. Ford Chief Executive Officer Alan Mulally, who took over the top post in September 2006 from Bill Ford has been restructuring Ford to counter losses. As a part of restructuring Ford has been selling assets in a bid to offset falling sales and profits. Premier Group, which includes Aston Martin, Volvo,Land Rover and Jaguar is the main cause for Ford continuing losses. Earlier this year Ford sold its UK based sports car division Aston Martin(popularly known as james bond car) for $848 million to investors led by U.K. auto-racing champion David Richards. Many believed that Ford was in talks with Germanys BMW to divest the Volvo brand but Ford denied any such sale of Volvo. Ford reported a loss of $282m for the first three months of 2007. Tatas Ferrari ride: Soon we can see the Ferraris cruising in India roads, as an extension of the existing TataFiat(parent company of Ferrari) partnership, Fiat is planning to drive Ferrari into India and its navigator will be the Tata Motors. The worlds favourite sports car Ferrari will zoom into Indias exclusive sports car market currently dominated by porsche. The two new Ferraris to be launched in India would be a 612 Grand Tourer, a big four seater and F430, an absolute sports car which is performance oriented. Tata Motors will market and set up engineering centers as a post sale services for these cars. After some bad experiences in China and Russia, Ferrari did not want to take chances by going it alone. With Tatas in fold, the Italian major is expecting a solid infrastructure back up in India. Ferrari and Tata are natural partners because Ferrari already gets lot of its software done from TCS. source: NDTV profit Tatas to setup production base in Thailand: Tata Motors, Indias top commercial vehicle maker, will invest 1.3 billion baht (38 million dollars) to launch its first production base in Thailand, the Thai Board of Investment said on July 18th. Tata Motors plans to roll out one-tonne pick-up trucks by the end of this year with initial output capacity of 7,000 units per year, the state-run investment promotion agency said. Tata Motors aims to boost annual production capacity to 30,000-35,000 units over the next five years, with 80 percent of light pick-up trucks to be sold in Thailand and the rest for export, the agency said.