Page 211 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes Advisory Service relating to Mergers and Takeovers

A merger is a combination of two companies into a single company where one survives and
other loses its corporate existence. A takeover is the purchase by one company acquiring
controlling interest in the share capital of another existing company. Merchant bankers are the
middlemen in setting negotiation between the two companies.

Case Study Role of Merchant Banks in Tata Corus Acquisition

n January 31, 2007, Tata Steel Limited (Tata Steel), one of the leading steel producers
in India, acquired the Anglo Dutch steel producer Corus Group Plc (Corus) for
OUS$ 12.11 billion (€ 8.5 billion). The process of acquisition concluded only after
nine rounds of bidding against the other bidder for Corus - the Brazil based Companhia
Siderurgica Nacional (CSN).
While Tata Steel had earlier roped in merchant bankers ABN Amro and Detusche Bank as
their financial advisors for the Corus bid in 2007, it had to later hire UK-based merchant
bankers NM Rothschild & Sons as financial advisor for the then proposed acquisition. This
was clearly a move taken by Tata to topple its Brazilian rival.
As a result of the services provided by Rothschild, the Tatas made the winning bid of 608
pence a share as against CSN's final bid of 603 pence a share in the ninth round of bidding.
CSN reportedly pulled out thereafter. The Tata bid was 34% higher than its original bid.
This acquisition was the biggest overseas acquisition by an Indian company. Tata Steel
emerged as the fifth largest steel producer in the world after the acquisition. The acquisition
gave Tata Steel access to Corus' strong distribution network in Europe.
Question
Analyse the role of Rothschild in Tata's acquisition of Corus.
Source: www.business-standard.com
www.rediff.com/money/tatacorus.html
Off Shore Finance

The merchant bankers help their clients in the following areas involving foreign currency.

1. Long term foreign currency loans
2. Joint ventures abroad
3. Financing exports and imports
4. Foreign collaboration arrangements

Non-resident Investment

The services of merchant banker includes investment advisory services to NRI in terms of
identification of investment opportunities, selection of securities, investment management, and
operational services like purchase and sale of securities.

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