Business Daily from THE HINDU group of publications
Tuesday, Dec 12, 2006
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Business Daily from THE HINDU group of publications Tuesday, Dec 12, 2006 ePaper |
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Steel Corporate - Mergers & Acquisitions
Amit Mitra
Mumbai/London , Dec 11 In a punch-for-punch price battle for Anglo-Dutch steel maker Corus, Brazilian company CSN's bid at 515 pence a share has, for the moment, won the round against the revised offer of Tata Steel of 500 pence a share. However, the final whistle is yet to be blown, as Tata Steel has promised a "further announcement in due course." In a day of dramatic developments, Tata Steel, which had been waiting for CSN to come out with a formal bid, decided to move in and clinch the deal by upping its original offer of 455 pence by 10 per cent to make a revised bid of 500 pence on Monday morning.
Tata Steel will have to pay about $9.2 billion for Corus (£4.7 billion pounds), against $8.1 billion linked to its first offer of 455 pence. The company's revised intention was intended to serve a knockout blow to an anticipated CSN offer of 475 pence - the offer with which the Brazilian firm had approached Corus on November 17. Hours later, however, CSN barrelled in with a 515 pence offer, which beat Tata Steel's revised offer by three per cent.
CSN's counter offer of £4.9 billion ($9.6 billion) could lead to some furious trading of punches in the days leading to the scheduled shareholders' meet on December 20. Corus shares rose to 527.75 pence by 12.44 p.m. GMT on the LSE. However, both Tata Steel and CSN shares tanked in their respective markets. While Tata Steel lost 6.4 per cent or Rs 30.85 to close at Rs 453.85 on the NSE, CSN shed 1.8 per cent to 63.60 Brazilian reals ($29.77) in the Brazilian market in early trade. Analysts tracking the deal said that the CSN announcement has forced the Tatas to take fresh guard and it may go some more distance to knock down the Brazilian firm.
At the time of making the revised bid, Mr Ratan Tata, Chairman of Tata Steel, said: "We remain convinced of the compelling strategic rationale of this partnership and the revised terms deliver substantial additional value to Corus shareholders." For Tata Steel, acquiring Corus would make the merged entity the fifth largest steel producer in the world. The Tatas would also benefit from the finished mills of Corus in Europe that supply steel to automakers such as Ford Motor and Volvo. Responding to Tata Steel's revised offer, Mr Jim Leng, Chairman of Corus, said: "The revised acquisition terms from Tata Steel are a substantial increase from the previous offer. Accordingly, the Corus board is pleased to recommend this to Corus shareholders." The 500 pence bid from the Tatas means a premium of about 38.7 per cent to the average closing mid-market price of 360.5 pence per Corus share for the 12 months ended October 4, which was the last business day prior to the announcement made by Tata Steel that it was evaluating various opportunities including Corus. After CSN deflected Tata's bid with its 515 pence offer, Corus responded by stating: "This (CSN's) offer is both higher than the initial proposal by CSN as well as the revised Tata offer of 500 pence a share. It is also consistent with our strategic objective of securing access to raw materials, low-cost production and growth markets." Clearly, Corus is eager for the best price, and will wait for both the bidders to tire themselves out. With CSN now bidding better than the Tatas and with more than a week to go for the December 20 EGM, an expert watching the development speculated that the shareholder meeting would be deferred again.
Related Stories: More Stories on : Steel | Mergers & Acquisitions | Tata Steel Ltd | Overseas Investments | Steel
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