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Tata Steel Acquisition of Natsteel – Impact on Economic Value AddedBy Nilanjan Sen, Ho Kim Wai & D. G. Allampalli |
Abstract
In August 2004, B. Muthuraman, managing director of Tata Steel, India, led his strategic planning team to make an unsolicited offer to acquire the steel business of the National Iron and Steel Company, Singapore (NatSteel). Valued at US$289.50 (S$486) million, the NatSteel acquisition was India's second largest in that year.
The acquisition provided Tata Steel with access to NatSteel's customers and steel finishing capacity in Southeast Asia and East Asia. It also catapulted Tata Steel's installed capacity from four to six million tons and global ranking from 56 to 28. Although the deal looked inexpensive to Muthuraman as compared to setting up a new integrated steel plant of a similar size, he felt that successful cross-border acquisition management remained a key challenge to realise its value and his VISION 2007: Sustaining the 'EVA-Positive' status for the company.
Issues: Economic value added (EVA) analysis, international business valuation and overseas acquisition.
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