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A merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated
An acquisition is the purchase of one business or company by another company or other business entity.
Gain market share Economies of scale Enter new markets Acquire technology Utilization of surplus funds Managerial Effectiveness Strategic Objective Vertical integration
Arcelor was the world's largest steel producer in terms of turnover before takeover. Second largest in terms of steel output. Guy Dolle was the CEO of Arcelor and its headquarter was in Luxembourg city. In 2005, Arcelor had revenues of $38.84 billion. Arcelorwas created through the merger of three companies: Arbed, Aceralia and Usinor
January 2006 : Mittal Steel offers the shareholders of Arcelor to create the world's first 100 million tonne plus steel producer.
The deal valued at $22.7 billion offer to Arcelors shareholders The deal was split between Mittal Shares (75 percent) and cash (25 percent)
An Attractive Target: Arcelor had 71% pre merger revenue share from Europe while Mittal had only 34% While in North America The revenue share for Arcelor was only 9% but Mittal had 42% So they had complementary industrial and market footprint
Arcelor Management The management was extremely hostile to Mittal Steels bid The CEO of Arcelor dismissed Mittal Steel as a company of Indians European governments The French, Spanish and the government of Luxembourg was against the deal The French opposition was initially very fierce But It was criticized in the British, American and Indian media as double standards and economic nationalism in Europe
Deal was not getting pushed due to MITTALs Indian Nationality The then Commerce Minister KamalNath raised the issue through various forums But LN Mittal himself felt that there was no case of racism He emphasized that Mittal Steel was a European company and NOT an Indian one.
Deal finally clinched when the shareholders of Arcelor agreed to Mittal Steels offer In June 2006 Mittal raised its valuation of Arcelor to $32.9 billion.
Products of Tata Steel include hot and cold rolled coils and sheets , wire and rods, construction bars, pipes, structural and forging quality steel
Ratio Analysis
Trend Analysis Steel Industry Analysis
ArcelorMittal
Tata Corus Data Used: Balance Sheet and Income Statement
Year Revenue Total Revenue Cost of Revenue, Total Gross Profit Selling/General/Administrative Expenses, Total Research & Development Depreciation/Amortization Interest Expense (Income), Net Operating Unusual Expense (Income) Other Operating Expenses, Total Operating Income Interest Income (Expense), Net NonOperating Gain (Loss) on Sale of Assets Other, Net
0.0
0.0
0.0
-912.0
-624.0
0.0 0.0
0.0 0.0
0.0 0.0
0.0 0.0
0.0 49.0
Key Figures
Company 2005 Sales (bil.) 1-Year Sales Growth 2005 Net Income (bil.) 1-Year Net Income Growth Employees Soucre: Companies' statements Mittal Arcelor (MT) (Paris: LOR) $28.10 27% $3.37 -28% 175,000 $38.84 8% $4.58 66% 96,000 $7.95 Total $66.94
Tax Rate EPS (%) 2.03 -79.69 0.15 0.0 6.68 9.72 8.02 20.0 5.92 15.09 4.79 18.84
Book Value/ Share 12/10 12/09 12/08 12/07 12/06 12/05 $40.31 $40.47 $40.45 $39.87 $30.43 $18.64
Return Return Debt/ on Equity on Assets Equity (%) (%) 0.42 0.41 0.62 0.54 0.63 0.63 5.2 0.4 16.8 19.8 13.9 24.8 2.5 0.2 7.0 8.4 5.2 9.7
Net Profit Margin (%) 4.2 0.4 7.9 11.7 10.5 11.7
Strong financial performance in the second half of 2006 Full-year (EBITDA) rose 2.1% to $15.27 billion from $14.96 billion in 2005 Combined sales slightly decreased in 2006 but had a quantum jump in 2007 Sales figure for Mittal Steel more than doubled after the merger. Net Income of the company has risen from $3.36 billion to $6.10 billion in 2006 and to $11.8 billion in 2007 Venture into new businesses and market like Luxembourg, Senegal, Liberia Enlarged brand portfolio
71.58
56.37 69.7 63.85 72.74 63.35
2010
2009 2008 2007 2006
Before the deal TATA STEEL was the 56th largest producer of steel. After the deal it became the 5th largest
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 The price that they paid represents a premium of over 68% over the average closing market share price over the twelve month period The day after the acquisition was officially announced, Tata Steels share fell by 10.7% on the Bombay stock market.
Full-year (PBDIT) rose 21.3 percent to Rs. 8830.95 cr. from Rs. 7275.87 cr. in 2008 Combined sales increased 12.61 percent to Rs. 19654.41 cr. Profit of the company has risen from Rs. 3506 cr. to 4222 cr. Economies of Scale Forward integration for Tata Steel Increased presence in global markets
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