The Hindu Business Line : `Tata Steel must soon top CSN counter bid for Corus'

What analysts say
Counter offer a boon for traders; some of the long players, who have been reducing holding, are sure to stop (selling).
The kind of trust and goodwill of Corus employees enjoyed by Tatas might be a clincher in the final show down with a rival bidder

Kolkata , Nov. 18

Analysts and bankers felt that Tata Steel would have to top the rival bid for Corus shortly since CSN would move quick.

"Maybe on Monday CSN would wrap up its debt finance plan with a consortium of banks consisting of Barclays, Goldman Sachs and BNP Paribas, for a formal approach for Corus.

"It is also likely to get in touch with Corus Engineering Steel Pension Fund trustees", a top investment bank official told Business Line from London.

A head of the trading desk of a global securities fund said that for the market movement in Corus, CSN's counter offer was a boon for the traders; some of the long players, who have been reducing holding, are sure to stop (selling).

Though CSN is yet to complete due diligence, analysts felt that since it came close to merging Corus with it in 2002, it would be a routine and fast exercise.

"Corus management till recently has been in talks with CSN for reviving the idea of a synergy. Both know each other's strength and weaknesses very closely", Mr Tim Davidson of Unix Fund Management, said.

An official of UK hedge fund, which is still holding on to its investment gains in Corus, said fund managers at Standard Life, one of the main investors in Corus, had been quietly campaigning for a rival bid even though its average acquisition cost of Corus shares reportedly was 300 pence each.

However, she felt that the kind of trust and goodwill of Corus employees enjoyed by Tatas might be a clincher in the final show down with a rival bidder.

She said that Tatas had struck the cord early. CSN's promise to match Tatas on the security score will take time to sink in and would go through a close scrutiny by the trustees, who also hold substantial stake in Corus.

Tatas have already had lengthy discussions with employees' panel regarding the pension fund and the panel had been given the opportunity to meet the representatives of Tata Steel before the announcement of the proposed transaction, to raise any issues regarding the safeguards for the future security of the pension scheme.

Under the British law, the company management can dip into pension funds. Corus employees' fund is worth 9 billion, much more than the bid and the counter bid, sources pointed out.

Funding for Tatas

Banking sources in London said for Tata Steel, Credit Suisse had recently taken over the responsibility of the lead financing bank, aided by ABN Amro and Deutsche Bank.

Credit Suisse was appointed by Corus as its advisor. ABN Amro and Deutsche Bank — which were appointed by Tata Steel UK to raise debt funds for the acquisition — were unable to organise the amount.

Of the £3.3 billion of financing being raised under the new arrangement, Credit Suisse will provide 45 per cent and ABN Amro and Deutsche Bank share up 27.5 per cent each.

Another $1.8 billion bridge loan being raised at Tata Steel is being shared between Standard Chartered and ABN Amro in India.

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