Tatas may offer up to 500-510 pence in battle for Corus

MUMBAI: The Tata Steel board, which met on Thursday for three hours, deliberated on the strategy the company would take if Brazil’s CSN made a formal offer to buy Corus. The board also discussed the extent to which the Tatas, one of India’s foremost business families, would go to buy the Anglo Dutch company.

According to top level sources in Tata Steel, the 11-member board discussed among other things the maximum level to which Tata Steel could go in case a “bidding war” ensued with the possible entry of more players. Tata Steel had made an offer of 455 pence, which was later countered by CSN’s 475 pence-a-share offer.

The Brazilian steelmaker, which is currently the lone competitor to Tata Steel, is learnt to be working toward finishing a due diligence of Corus before December 4, the date by which shareholders of the Anglo Dutch steel company meet to vote on Tata Steel’s offer. It is expected that CSN could make a formal offer by that time.

While Tata Steel’s sources gave no indication of the price level that was apparently discussed, it has been reliably learnt that a band of 500-510 pence could be considered the maximum that the Tatas could offer. Coincidentally, most of the merchant bankers involved in the Corus bid were also present at Bombay House, the Tatas’ registered office, on Thursday.

Tata Steel’s board meeting on the fourth floor of Bombay House, also apparently took in reports that Russia’s Severstal could likely jump in the bidding fray. While the board members present weren’t sure of the accuracy of the Russian steelmaker’s intentions, it was agreed by all that the bidding “game” could intensify as the days progressed.

The company’s managing director, B Muthuraman, who was welcomed by a barrage of media persons outside Bombay House, refused to comment or elaborate on the agenda after the meeting.

Severstal recently fuelled speculation about a possible participation in the Corus bidding war when the Russian company appointed UK-based Chris Clarke as non-executive chairman after completing a $12-bn listing in London. Mr Clarke made his intentions loud and clear when he said that Severstal would pursue opportunities for growth and creation. Severstal has in the recent past indicated its eagerness to grow through acquisitions mainly in Europe and the US.

Indications of a possible “war” for Corus strengthened as international agencies on Thursday reported Jose Marcos Treiger, CSN’s head of investor relations, as saying that while they (the Brazilian company) had the utmost respect for Tata Steel, “We feel we are a better fit for Corus. We are ready to grow internationally because we need to complement our domestic market. There will be a lot of synergies between CSN and Corus.”

The Brazilian company earlier this week lost out on its bid for the US-based Wheeling-Pittsburgh to Esmark. Shares of Tata Steel reflected a wary market, dropping 0.2% to Rs 471.45 on the BSE on Thursday.

The metal index was up 0.6%. Shares of Corus hit a five-year high on the London Stock Exchange on Thursday morning, but at the time of going to the press, they had fallen back to Wednesday’s close of 506 pence.

Agencies reported the European Commission, which has set January 3 as the deadline to rule on Tata Steel’s $ 8.1bn bid on Corus, can extend its deadline if rivals complain or if it identifies possible antitrust problems with the deal.

“It usually decides on mergers where the companies firms make more than $6.4bn worldwide $322m in Europe. However, Tata’s offer is unlikely to face lengthy antitrust scrutiny as the two companies have few overlaps,” said the report.
the two companies have few overlaps,” said the report.