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Corus Group Ltd | Thomson Reuters Eikon

Balance Sheet
Annual Standardised in Millions of British Pound Sterling
2002 2003 2004 2005 2006
Period End Date
Assets (£ Millions)
Cash and Short Term Investments 270 380 600 956 864
4% 5% 7% 10% 9%
Accounts Receivable - Trade, Net 1,026 1,002 1,212 1,383 1,506
% Receivable of Sales 14% 13% 14% 15% 15%
Total Inventory 1,337 1,404 1,732 1,954 1,890
Inventory/Sales 19% 18% 21% 21% 19%
Prepaid Expenses 320 336 0 0 0
Other Current Assets, Total 137 143 0 3 1
Total Current Assets 3,305 3,396 3,714 4,446 4,412
CA /Sales 0.46 0.43 0.44 0.49 0.45

Property/Plant/Equipment, Total - Gross 8,745 8,844 8,647 8,455 8,342


Property/Plant/Equipment, Total - Net 2,871 2,729 2,793 2,820 2,758
% change in PPE YoY -5% 2% 1% -2%
Total Assets 6,431 6,380 7,291 7,942 8,080
0.89 0.80 0.87 0.87 0.83

Liabilities (£ Millions)
Accounts Payable 1,053 992 1,191 1,278 1,315
15% 12% 14% 14% 14%
Payable/Accrued -- -- -- -- --
Accrued Expenses 0 0 42 45 31
0% 0% 1% 0% 0%
Other Liabilities 583 591 1164 1144 1002
Total Current Liabilities 1,636 1,583 2,397 2,467 2,348
Current Assets/CL Ratio 2 2 2 2 2

Total Long Term Debt 1,428 1,280 1,063 1,308 1,236


-12% -20% 19% -6%
Total Debt 1,506 1,393 1,442 1,730 1,502
Total Liabilities 3,709 3,583 4,266 4,590 4,150
0.52 0.45 0.51 0.50 0.43
Shareholders’ Equity (£ Millions)
Redeemable Preferred Stock, Total -- -- -- -- --
Preferred Stock - Non Redeemable, Net -- -- -- -- --
Total Equity 2,722 2,797 3,025 3,352 3,930
Total Liabilities & Shareholders' Equity 6,431 6,380 7,291 7,942 8,080
Forecast Forecast Forecast Forecast Forecast Metrics for Forecasting
2007 2008 2009 2010 2011 Assets/Sales
Average CA/Sales
Average Inventory/Sales
694.3 768.2 808.8 884.3 940.2 Average Cash/Sales
7% 7% 7% 7% 7% Average CA/CL
1512.2 1633.1 1763.8 1904.9 2057.3 Average AP/Sales
14% 14% 14% 14% 14% Average Receivables/Sales
2054.0 2218.3 2395.8 2587.5 2794.5
20% 20% 20% 20% 20%
0 0 0 0 0
1 1 1 1 1
4765.0 5146.2 5557.8 6002.5 6482.7 Increased in proportion to Sales
0.45 0.45 0.45 0.45 0.45

8509 8679 8853 9030 9210


2,813 2,869 2,927 2,985 3,045 Minor change in Capex, Average Change is 2%
2% 2% 2% 2% 2%
8,923 9,636 10,407 11,240 12,139
0.85 0.85 0.85 0.85 0.85

Forecast Forecast Forecast Forecast Forecast


2007 2008 2009 2010 2011
1,444 1,559 1,684 1,819 1,964
14% 14% 14% 14% 14%
-- -- -- -- --
28 30 32 35 38
0% 0% 0% 0% 0%
1117 1207 1303 1408 1520
2,589 2,796 3,020 3,261 3,522
2 2 2 2 2

1,199 1,163 1,128 1,094 1,061 Long term debt is reducing YoY by Average 3%
-3% -3% -3% -3% -3%
1,173 1,399 1,639 1,894 2,166
4,961 5,358 5,786 6,249 6,749
0.47 0.47 0.47 0.47 0.47

-- -- -- -- --
-- -- -- -- --
3,962 4,279 4,621 4,991 5,390
8,923 9,636 10,407 11,240 12,139
0.85 % of Sales Assets
0.47
20% % Days Payable
10%
2 Liquidity Ratio
14% % of Sales Payable
14% % of Sales Receivable

verage Change is 2%

g YoY by Average 3%
Corus Group Ltd | Thomson Reuters Eikon
Income Statement
Annual Standardised in Millions of British Pound Sterling
2002 2003 2004 2005 2006
Revenue 7,188 7,953 8,373 9,155 9,733
Net Sales 7,188 7,953 8,373 9,155 9,733
Total Revenue 7,188 7,953 8,373 9,155 9,733
Growth in Revenue 11% 5% 9% 6%
Cost of Revenue, Total 6,925 4,812 4,913 5,463 6,275
% Cost of Revenue 96% 61% 59% 60% 64%
Gross Profit 263 3,141 3,460 3,692 3,458
Selling/General/Admin. Expenses, Total 656 1,745 1,611 1,658 1,499
Selling/General/Administrative Expense 9% 22% 19% 18% 15%
Total Operating Expense 7,613 8,152 7,756 8,512 9,276
106% 103% 93% 93% 95%
Operating Income (425) (199) 617 643 457
Net Income -458 -305 447 452 223
PAT % of Sales -6% -4% 5% 5% 2%

Without Synergy
EBIT -425 -199 617 643 457

EBIT*(1-Tax%) -298 -139 432 450 320


NWC 1,447 1,557 1,711 2,017 2,051
20% 20% 20% 22% 21%
Change in NWC 110 154 306 34
Add Depriciation
Net PPE 2,871 2,729 2,793 2,820 2,758
Change in Net PPE -142 64 27 -62

FCF (298) (107) 214 117 348

Terminal Value
Enterprise Value
Firm Value(EV+ Cash/Equivalents)
$ mn. Firm Value(EV+ Cash/Equivalents)

With Synergy
EBIT -425 -199 617 643 457
Cost Synergy
Revised EBIT -425 -199 617 643 457
EBIT*(1-Tax%) -298 -139 432 450 320
NWC 1,447 1,557 1,711 2,017 2,051
Change in NWC 110 154 306 34
Net PPE 2,871 2,729 2,793 2,820 2,758
Change in Net PPE -142 64 27 -62

FCF (298) (107) 214 117 348

Terminal Value
Enterprise Value
Firm Value(EV+ Cash/Equivalents)

$ mn. Firm Value(EV+ Cash/Equivalents)


$ mn. Valuation of Corus by TATA Steel

Extra Paid
Forecast Forecast Forecast Forecast Forecast
2007 2008 2009 2010 2011
10512 11353 12261 13242 14301
10512 11353 12261 13242 14301
10512 11353 12261 13242 14301
7% 8% 8% 8% 8%
6,394 6,906 7,458 8,055 8,699
61% 61% 61% 61% 61%
4117 4447 4802 5187 5601
1963 2120 2289 2473 2670
19% 19% 19% 19% 19%
10018 10558 11403 12182 13157
95% 93% 93% 92% 92%
494 795 858 1059 1144
440 476 514 555 599
4% 4% 4% 4% 4%

494 795 858 1059 1144

345 556 601 742 801


2,096 2,263 2,444 2,640 2,851
20% 20% 20% 20% 20%
45 168 181 195 211

2,813 2,869 2,927 2,985 3,045


55 56 57 59 60

246 332 362 488 530

4530
3123
4064
7924
494 795 858 1059 1144
179 179 179 179 179
673 974 1037 1238 1323
471 682 726 867 926
2,096 2,263 2,444 2,640 2,851
45 168 181 195 211
2,813 2,869 2,927 2,985 3,045
55 56 57 59 60

371 458 488 613 655

4266
3348
4289

8363
12000

3637
Metrics for Forecasting
Avg. Revenue Growth 8%
Avg. % COGS of Sales 61%
Avg. % SG&A of Sales 19%
Average operating expenses % of Sales 95%
Corporate Tax Rate 30%
PAT % of Sales 4%

Cost of Capital WACC Calculation


Risk Free Rate 4.50%
Beta 2.17

Cost of Debt (Kd) 6%


Market Risk Premium 7%
Cost of Equity 19.7%
Weight of Debt 24%
Weight of Equity 76%
WACC 15.94%

Long term Growth Rate 3.80%

Discount Factor 0.8625


Assuming Constant synergy cost reduction
References
https://www.oecd.org/sti/ind/43312347.pdf

https://www.contractorcalculator.co.uk/taxtables2006.aspx

References
https://bib.kuleuven.be/files/ebib/jaarverslagen/CORUS_2006.pdf
http://tata-corus.blogspot.com/

Corus’ credit ratings, which are a key determinant of the terms on which the
Group can issue debt, improved during the year and at 30 December 2006 the
corporate long term ratings were as follows: • Moody’s: Ba2 • Standard &
Poor’s: BB

In 2006 the global economy enjoyed one of its strongest periods of


expansion in 20 years, with economic growth accelerating from 3.3% in
2005 to 3.8% in 2006
Source: ThomsonFinancial

https://ycharts.com/indicators/moodys_seasoned_
aaa_corporate_bond_yield

https://bib.kuleuven.be/files/ebib/jaarverslagen/C
ORUS_2006.pdf
Date Acquirer Target Region EV/EBITDA
Jan, 2007 Nucor Harris Canada 9
Dec, 2006 Evraz Oregon Steel US 5.8
Dec, 2006 Arcelor Mittal Sicartsa Mexico 5.7
June, 2006 One Steel SMorgon Australia 9.9
June, 2006 Mittal Arcelor Europe 5.5
May, 2006 Arcelor Severstal Russia 5.6
Nov, 2005 Arcelor Dofasco N America 6.1
Oct, 2005 Mittal Krivorizhstal Ukraine 4.7
Sep, 2005 Oyak Erdemir Turkey 7.3
Oct, 2004 Mittal ISG N America 5.5
Oct, 2004 Arcelor CST L America 3.8
Average 6.3

Feb,2007 TATA Steel Corus Europe 9

Source
http://www.aabri.com/manuscripts/09198.pdf
http://www.thetakeoverpanel.org.uk/new/

~45% higher estimated Valuation by Tata Steel than Industry Average of similar transactions for majority stake control
ajority stake control
EV/MT
Company ROA % ROE % ($) P/E P/B
Arcellor Mittal 6.8 11.1 1192 11x 2.1
POSCO 11.3 15.7 1807 13.9x 2.2
Bao Steel China 5.98 5.9 2512 3.9x 3.9
US Steel 16.8 31.4 662 2.0x 2
Nucor 17 29.38 762 3.0x 3
Thyssen Krupp 7.4 21.4 N.A 2.1x 2.1

Source: Capitaline Database Average


Median

$ Bn
EBIDTA TATA 1.34
Steel_2006
Median_Valuation 8.69
Average_Valuation 9.69
EV/EBITDA Company name Production Capacity Comments
6.2 Arcellor Mittal 110 Significantly larger
7.9 Posco 30.5 Larger
11.2 Bao Steel China 23 Comparable
7.2 US Steel 19 Comparable
5.8 Nucor 18.5 Comparable
4.8 Corus 18 Self
Thyssen Krupp 16.5 Comparable
7.3
6.5
Type Value(US $Bn)
Actual Acquisition 12
DCF Without Synergy 7.93
DCF With Synergy 8.36
EBITDA Median_Valuation 8.69
EBITDA Average_Valuation 9.69

Value(US $Bn)
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