The Hindu Business Line : After one more round in the Corus `takeover open'

The race for the Corus trophy is still on, after the contenders Tata and CSN played out what seems to be just one more round in the takeover open. "It's been an exciting weekend for the Corus Board and Corus shareholders with not one but two offers announced this morning at a higher value than the offer from Tata Steel made on October 20," read a mail dated December 11, from Mr Roy Montague-Jones, who heads the India Group of the UK-based law firm Richards Butler LLP. Here are his answers to a few questions from Business Line.

First, the facts.

Tata Steel announced an increase in the value of its original offer from £4.75 to £5 per Corus share, only to have that increased offer topped by an offer 3 per cent higher at £5.15 which was announced by CSN (Cia Siderurgica Nacional), a steel-maker based in Brazil with operations in Brazil, the US and Portugal. It is likely that, by increasing the value of its original offer, Tata Steel was trying to put the acquisition of Corus outside CSN's financial reach. The Board of Corus is now intending to recommend the offer from CSN.

What structure will CSN's offer take?

The Brazilian offer will be implemented by way of a scheme of arrangement, like the offer by Tata Steel. "This is an arrangement, which is proposed by the Board of a target company to its shareholders and sanctioned by the High Court. One reason for proceeding in this way is that stamp duty at 0.5 per cent of the value of the offer, which is normally payable by the offeror, can largely be avoided if the offer is structured as a scheme.

Is Corus' pension a roadblock?

CSN's announcement follows discussions with the trustees of Corus' two main UK pension schemes. Corus' large pension scheme deficit had been seen as a barrier to the Group's takeover. CSN will fund the deficit in one, and help increase the employer contribution rate to the other.

CSN's offer is subject to pre-conditions.

Yes, the scheme of arrangement to implement CSN's offer is subject to pre-conditions, which basically boil down to the scheme of arrangement to implement the Tata Steel offer not going ahead - either being rejected by the Corus shareholders or the High Court, or being withdrawn. CSN has also reserved the right, with the consent of the UK Takeover Panel, to change the mechanics of its intended acquisition to a takeover offer.

What does all this mean to Corus shareholders?

CSN's offer is now the highest offer on the table. Corus shareholders will have to wait and see if, having failed to knock CSN out of the ring with its increased offer on Monday, Tata Steel will regroup and come back with an even bigger punch.

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