Tatas not giving up in battle for Corus

The Tatas’ bid to acquire the Anglo-Dutch steel maker Corus group headed for a see-saw struggle on Monday as rival CSN of Brazil made a still higher offer, within hours of Tata Steel upping its own bid. But Ratan Tata is not giving up yet, and sources close to the deal said a counter-offer could be expected in the battle to make the world's fifth largest steel maker.

According to these sources, Tata Steel will revise its bid by five to eight per cent in the aftermath of CSN's 515 pence per share offer. The CSN offer came after a Sunday night announcement from Tata Steel that it would pay 500 p, 45 p up from its original 455 pence a share offer. These sources said the Tatas could go as high as 525 p or even further. 

However, whether the deal will close at 525 p is still uncertain. According to industry experts, the deal is expected to close at 550 p per share. Since financial investors like Barclays, Standard Life and others have propped up CSN to get a better price from Tata Steel, the bidding process is expected to intensify further.

Reacting to CSN's 515-pence offer, Tata Steel tersely indicated that the battle was not over.

“Tata Steel has noted the development and will consider its position,"  its spokesman said.

The entire process will be completed by December 20, the day scheduled for the shareholders meeting at Corus to approve the CSN offer. Corus, which was originally valued at $8.4 billion by Tata Steel, is expected to command a much higher price - more than  $10 billion - as a result of the war. Tata Steel, apprehending a bidding war, has raised $9.5 billion already. But it may now have to raise even more.

The special purpose vehicle (SPV), created for this purpose has raised $9.5 billion. This includes an equity contribution of $3.88 billion from Tata Steel and a fully underwritten non-recourse debt of $5.63 billion. In case the bidding price goes to 550 pence, the acquisition cost would be around $10.5 billion.

Reacting to the CSN offer, the Corus share price jumped by five per cent to a new high of 527 p on the London Stock Exchange.

CSN said that acquisition would create a top five global steel group with approximately 24 million tonnes of annual steel production and, by 2010, approximately 50 million tonnes in annual iron ore production.

No one  expects that the Tata and Brazilian CSN offers would lead to a bidding war akin the Lakshmi Mittal’s attempt to acquire Arcelor. A City analyst had said after the late Sunday night fresh offer by Tata of £4.7 billion,  “ The renewed offer of Tata showed its steely resolve to withstand and outlast the Brazilian blizzard.

"Anything is possible," a Corus official told Hindustan Times in London.

Corus’s chairman Jin Leng said of the Tata offer: “The revised acquisition terms are a substantial increase from the previous offer. Accordingly Corus is pleased to recommend this to shareholders.” But his words did not match CSN's quickfootedness.

A Corus spokesman said the board was recommending that shareholders now accept the CSN offer. Leng, who had backed the latest Tata offer on Sunday night, too, approved the CSN bid on Monday.

Email Arun Kumar: arunkumar@hindustantimes.com