Corus shareholders eye top dollar in bidding war
On December 4, Corus shareholders’ are due to meet to decide between CSN and Tata Steel, or maybe even more players if a bidding war blows up.
By Sudeshna Sen, TNN |
LONDON: It’s the final countdown. On December 4, Corus shareholders’ are due to meet to decide between CSN and Tata Steel, or maybe even more players if a bidding war blows up.
The city is alive with rumours, and Corus share price rose another 3.75 pence to a stubborn 505.75 pence at 1230 GMT, well above both the approaches.
At these levels, shareholders are unlikely to settle for anything less than the top dollar. By the time it’s put to shareholders, CSN will need to have its offer on the table. Tata Steel may have to make a counter bid, and the Corus board will have to make its recommendation to shareholders.
In the final analysis, the fate of Tatas’ bid for the biggest takeover in Indian corporate history depends, as a person close to Corus said, “on how deep its pockets are.” The Corus board, if CSN makes a formal bid which is higher than the Tatas, has to recommend it to its shareholders, and does not have much elbow room in that decision.
If it withdraws its earlier recommendation, Corus has to pay a GBP 43m break-fee to Tatas. If the Tatas top CSN’s counterbid, as is expected by almost everyone watching the outcome that will be the one the board may have to recommend.
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CSN is now in the process of due diligence, and the company is expected to be able to make a formal offer sometime next week. At around the same time when Ratan Tata was given the news by the media here, CSN chairman Benjamin Steinbruch was holding a meeting with Corus chairman Jim Leng. CSN’s top brass have been in meetings with Corus team over the weekend. CSN’s initial approach was asking for Corus to open its books for due diligence and give it access to the same information given to the Tatas. The Corus side has told the media that it intends to be ‘professional’ and give CSN access to its books.
People close to CSN told ET that the process of due diligence can be hurried through, “since it is not as if the target company is unfamiliar, as the two companies have already once gone through an aborted merger process.”
CSN has also tied up its financing to a large extent, picked up 3.8% in Corus, and indicated it is willing to get into a bidding war. Trading activity in Corus peaked on Tuesday, with Tatas’ key trump card — that it won over the pension trustees with its offer to sweeten the deal with clearing a deficit in one pension fund, increasing contributions to the main fund, and giving the schemes top billing as creditors — has been matched by the Brazilian contender.
CSN has announced that it will match the terms. CSN’s top team also met pension trustees, who are now faced with two equally attractive bids to choose between. The formal stance of Community, Corus’ biggest trade union – a powerful lobby – is that it will “seek a meeting with them and ask for their business plans, especially in the UK,” said a spokesperson.
He edge that CSN has over Tata here is that it can offer to start supplying low-cost iron ore from its Brazilian mines to Corus’ plants in the UK, and so protect more jobs in the UK. The Tatas are not in a position to match that, and the difficulties associated with supplying iron ore to Corus’ UK steel plants from India is well known in the UK.
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