The Hindu Business Line : What if one more firm bid for Corus at this stage

The Corus battle has entered a new phase with the UK Takeover Panel stepping in and setting a January 30 deadline for the two bidders, that is, Tata Steel and CSN (Cia Siderurgica Nacional) to make revised offers. To understand how the game has now changed, Business Line contacted Mr Roy Montague-Jones of the UK-based law firm Richards Butler LLP (www.richardsbutler.com) . Here are his answers to a few questions.

What does the UK Takeover Code provide for in situations such as what Corus is faced with?

While the UK Takeover Code does not specifically provide for situations in which there are competing offers, which are proposed to be implemented by schemes of arrangement, the Takeover Code does deal specifically with the possibility of competitive situations.

How long can the competitive situation continue?

If the competitive situation continues to exist in the later stages of an offer period, the Takeover Panel has the power under the Takeover Code to require revised offers to be published in accordance with an auction procedure the terms of which are determined by the panel. This procedure will normally require final revisions to competing offers to be announced by the 46th day the posting of the competing offer document, but an offeror will be allowed to revise its offer within a set period in response to any revision announced by a competing offeror on or after the 46th day.

Have the parties posted their offers?

In the present case, CSN has not posted its offer document since it intends to proceed by way of a scheme of arrangement, which is pre-conditional on the Tata Steel offer being rejected or withdrawn. However, in laying down a final date of January 30 for each of Tata Steel and CSN to announce revised offers, the Takeover Panel is seeking to apply the principles laid out in the Takeover Code to the circumstances at hand. In doing so, it would have held discussions with each of the parties and their advisers.

What should Corus shareholders do now?

I would expect any revised offers to emerge by mid-January, some way before the final deadline. As far as the Corus shareholders are concerned, they can sit back and see what emerges in terms of increased value offered for their shares. The directors of Corus are recommending adjournment of the Corus shareholder meetings scheduled for today until further notice. This will enable appropriate meetings to be held once it is clear what are the best terms being offered by Tata Steel and CSN, respectively.

What if one more company bid for Corus at this stage?

If yet another company stepped in with a bid for Corus now that could affect the timetable laid down by the Takeover Panel.

Any new bidder would doubtless discuss issues of timetable with the Panel on a confidential basis before announcing its offer.

It is one of the purposes of the Takeover Code to ensure that shareholders are treated fairly and are not denied an opportunity on the merits of a takeover.

However, Corus has been `in play' for a while now and, although Corus postponed its original shareholders' meetings to consider the Tata Steel bid in order to allow CSN more time to complete its due diligence, the Takeover Panel might take the view that the emergence of a further bidder at a late stage should not be allowed to cause a further significant delay in the overall timetable.

Have there been similar instances earlier - when the Panel stepped in?

There have been at least a couple of other competitive situations in which the Takeover Panel has stepped in and imposed a timetable to bring matters to a head. One was in April 2004 when two consortia, Brascan and Sylvester, were bidding for the UK real estate company, Canary Wharf for around £1.7 billion. Another was a battle for control of QXL Ricardo, an online auction company, in 2005, between Great Hill Partners, a US private equity house for which Richards Butler was acting, and Florissant, a vehicle backed by a Norwegian private equity fund.

Can the extended suspense affect the business of Corus?

It is part of the Takeover Panel's role to see that target companies do not remain under siege for protracted periods, so the Panel will always intervene if there is more than one bid still on the table in the late stages of the offer period.

The extended suspense could indeed affect the business of Corus since dealing with the issues raised by the Tata Steel and CSN offers has to be taken care of in addition to running the business, which is itself a full-time job for the management. The out-of-pocket costs of these bids for Corus, in terms of advisory fees, will also no doubt be significant.

Aren't shareholders of the bidding companies losing out because their companies have locked funds for acquisition?

I am not sure it is right to say that the shareholders of the bidding companies are losing out because their companies have locked funds for acquisition.

The boards of each of the bidding companies will have determined that it is in the best interests of their shareholders to acquire Corus, and that there is a good strategic case and synergies to be gained. If successful, Corus should be a prize worth waiting for.