Tata Steel board to meet on Thursday

MUMBAI: Tata Steel has called an unscheduled board meeting on Thursday to discuss the fallout of CSN’s 475 pence per share counter-bid for Anglo-Dutch steelmaker Corus. The meeting will be held in Bombay House and is likely to discuss options, including the possibility of a revised offer for Corus.

On Monday, the prospect of a bidding war for Corus moved one step closer to reality as news trickled in that Tata Steel’s arch rival Companhia Siderurgica Nacional had raised a loan of $7.5bn and would infuse another $1.8bn to finance its counter-bid. CSN also kicked off the due diligence process with an aim to quickly make a formal counter-offer, well before the Corus EGM on December 4.

Meanwhile, the top brass of Tata Steel along with group chairman Ratan Tata, were huddled in a day-long meeting at headquarters Bombay House on Monday. The meeting, which included Mr Tata, B Muthuraman, managing director of Tata Steel and Kaushik Chatterjee, vice president, finance, was on till the time of going to press. The company spokesperson was unavailable for comment.

Speculation was rife in investment banking circles that the Tatas would eventually revise their bid to about 500 pence a share to stay in the hunt for Corus. “The company will, however, wait for CSN to make a firm offer and Corus’ response to it, before declaring the revised offer,” said Tata Steel sources. The fourth largest steelmaker in Brazil had last week announced a counter-bid of 477 pence per share or 4.3% higher than Tata Steel’s offer made in October.

On Monday, CSN, through its bankers Goldman Sachs, BNP Paribus and Barclays, arranged a non-recourse loan of $ 7.5bn.Along with the $ 1.8 bln it will infuse from its reserves, the total war chest amounts to $ 9.3 bln, clearly revealing that the firm was fully prepared for a bidding war.

The bankers also have considerable holding in Corus with Barclays holding 4.7% stake and Goldman Sachs with 2% of the equity in the company. CSN already holds a stake of 3.8% in Corus through its investment arm. The Brazilian company might also get support of another major shareholder Standard Life, which was vocal about its disappointment with Tata Steel’s 455 pence cash offer.

Analysts say that they expect CSN to focus more on Corus, especially after its take-over bid for the US-based Wheeling-Pittsburgh Corp was thwarted. Shareholders of the American company have favoured a counter-bid by Chicago-based Esmark.

A CSN spokesman said that the due diligence shouldn’t take much time as the company was familar with Corus’ financial accounts. The two companies were involved in merger talks in 2002 that later failed. Tata Steel had also conducted the due diligence before it announced the firm offer on October 20.

CSN has roped in leading London-based law firm Macfarlanes and Wall Street firm Cravath Swaine & Moore as its counsels. Tata Steel UK, the special purpose vehicle set up by the Indian major for the proposed acquisition, is being advised by instructed Herbert Smith, a prominent UK law firm.

On the BSE, Tata Steel shares took a beating, driven by speculation that the steel major would be forced to revise its bid. On Monday, the stock ended lower by 2.6% at 463.4, even as the Sensex bounced back from a fall of 200 points to end flat. The metal index was down 2.3%. “From a financial point view, a hike in offer price is not a positive development for the shareholders,” reasoned a broker.

Corus shares continued their upward climb that began after CSN announced the counter-bid and touched the 500 pence mark on Monday. After ending at 495 pence on Friday, the company shares gained another 1% at the time of going to the press. The gain has been fuelled by shareholders expectations of a bidding war for Corus.