The Hindu Business Line : Corus: Consortium between Tata, CSN unlikely to occur

"I cannot think of any situation where three parties which are all listed companies have come together in a three-way merger in a single transaction."

Chennai , Jan. 13

Can there be a three-way merger involving Corus and its two suitors, viz. Tata Steel and CSN?

Arcelor was created through a merger of French, Spain and Luxembourg steel producers, in the first wave of regional steel consolidation in 2001, point out analysts, even as the naysayers quip back, `No way!'

To gain the UK perspective on the issue, Business Line contacted Mr Roy Montague-Jones of the London-based law firm Reed Smith Richards Butler LLP.

"I cannot think of any situation where three parties which are all listed companies have come together in a three-way merger in a single transaction," he observes.

"As a matter of logistics, tax planning and legal mechanics, it would just be too complicated and too difficult to manage," adds Mr Montague-Jones.

Here are his answers to a few related questions.

Don't we have examples where bidders joined hands?

There are plenty of examples of consortium bids being made, where two parties club together and jointly bid for/acquire a third, following which the business of the acquired company is parcelled out between the members of the buying consortium in accordance with an agreement reached between them at the time the consortium came together.

At the end of the bid battle between Great Hill Partners and Florissant for QXL ricardo plc, where the UK Takeover Panel instituted an auction process, Great Hill and Florissant came together with a single combined offer for QXL, only in that case another unconnected third party then intervened by purchasing QXL shares in the market and effectively put QXL beyond the reach of the combined Great Hill/Florissant bid.

Something similar can happen in the case of Corus too?

In the case of the bids for Corus, it seems to me that the formation of a consortium between Tata Steel and CSN is unlikely to occur.

Both are industry buyers and, as I understand it, each bidder is essentially interested in acquiring the same parts of the Corus business as the other, so Tata Steel and CSN are unlikely to reach agreement among themselves to club together to acquire Corus then divide the spoils between them.

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