Indian largest conglomerate largest take over


The Indian conglomerate, Tata group’s relentless pursuit of global buyouts culminates in the largest of them all with the acquisition of Corus group in a deal worth $10.3 billion. With this Tata will be counted among the world’s top conglomerates. It is coined now by he international business circles as ‘mother of all takeovers’.

The Tatas are finally close to reclaiming their position as India’s largest business group. Once the Corus take over formalities are completed by early next year the group’s turnover will almost double to $ 40 billion putting it way ahead of Mukesh Ambani’s Reliance group which currently generates $ 24 billion.

In the past few years the business editorial writers have started penning end to the group. Few gave Ratan Tata the chairman a chance to turn the group around. But all that changed when he Tata’s acquired Tetley Tea the world’s 2nd largest Tea plant in 2000 for $ 197 million.

The Tatas from this point clawed their way back to the reckoning. Now the $ 10.3 billion acquisition of Corus will add $ 7.7 billion to the Tata top line and give it a market capitalization in excess of $ 50 billion.

These companies along with a few unlisted companies have revenues of $ 22 billion — 2.8% of India’s GDP. And with 23 lakh share holders it forms 7% of Bombay Stock Exchange’s market capitalization.

The chairman of Corus when he was reviewing the numbers was not happy to find the labor costs a $110 per ton and raw materias at $ 300 to the ton were threatening to drive corus out of business.

After two months of intense deliberations the management reckoned India was where they ought to head to.. Iron Ore is abundant and labor cheap. They also identified Jindal’s JSW and Tata Steel as potential candidates who could be interested in Corus.

Jindal backed out because of valuation and Tatas were interested.
Tata Steel decided to take higher risks if they have to catch up with global steel companies. Meanwhile the talks between the chairmen of two companies along with their other directors’ team were progressing favorably. Finally, Tata had put in place a plan with financial backing from ABN Amro, Deutsche Bank and Standard Chartered.

A leveraged buyout was agreed upon and they decided to pump in equity o $3.8 billion. Tata steel and Tata & Sons contributed $ 1 billion each and another $1.8 billion would come as a bridge loan from ABN Amro and Standard Chartered Bank. Debt of $5.6 billion was to be taken as debt from Deutsche Bank and ABN Amro.

With the aforesaid take over with a single stroke he chairman Ratan Tata catapulted the company from 55 on the global steel pecking order to fifth largest steel manufacturer in the world.