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When Tata Steel Acquired Corus Tata Steel

The biggest steel producer in the Indian private sector acquired Corus, a Dutch Steel Company in a deal worth 12 billion USD in 2007. A financial decision of this magnitude has significant implicitness for both Tata Steel and Corus as well as their employees and shareholders. Details of acquisition are as follows:

This acquisition has been a largest private sector transaction by Indian company outside of India and named Tata Steel Europe in 2010.

Tata Steel raised a debt of over $8 billion to finance the transaction. The deal will be paid for by Tata Steel UK, a special purpose vehicle (SPV) set up for the purpose. Another company of the Tata group, Tata Sons Ltd., invested$ 1 billion dollars for preference shares along with Tata Steel which will invest an equal amount.

Tata Steel, the acquirer company, arranged about 36,500 crores of rupees to finance the take-over.

Tata Steel raised this amount through debt or equity or a combination of both. Some amount came from internal accruals also. This financing decision affected the capital structure of the acquirer

Tata Sons Ltd. investing $1 billion in preference shares most likely aimed at:

Increasing liquidity of Tata Steel

Ensuring control without voting rights dilution

Expanding Corus operations

Reducing working capital requirements

✅ Correct Option: 2

Preference shares provide capital without carrying normal voting rights, unlike equity shares. By investing $1 billion through preference shares, funds were raised for the deal without diluting the voting power and control of the existing equity shareholders. Hence the arrangement ensured control without voting rights dilution, option 2.

Question 41

Setting up Tata Steel UK as a Special Purpose Vehicle (SPV) mainly served which financial purpose?

Question 42

The use of internal accruals in financing the acquisition may indicate Tata Steel's reliance on which source of finance?

Question 43

The $12 billion acquisition deal's impact on Tata Steel and Corus as well as their employees and shareholders represents which type of financial decision?

Question 45

The financing of the Tata-Corus deal through debt and preference shares most directly impacts which aspect of Tata Steel's financial structure?

Tata Sons Ltd. investing $1 billion in preference shares most likely aimed at:

Solution

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