The Hindu Business Line : What next?

After the blistering action on the auction front, at the UK Takeover Panel, in which Tata won Corus after the dramatic bidding battle with CSN, a few questions linger on. And Mr Roy Montague-Jones of the London-based law firm Reed Smith Richards Butler LLP (www.reedsmith.com) answers the posers from Business Line.

What next?

The next step is the formal announcement under Rule 2.5 of the UK Takeover Code from the bidders of their firm intention to make their respective offers at the prices they specified in the auction.

Both Tata Steel and CSN are required to do this. The Corus board will also have to give its formal recommendation to the Tata Steel offer and this should be included in the Rule 2.5 announcement made by Tata Steel.

Then...

After that, since the deal will be proceeding by way of scheme of arrangement, Corus and Tata Steel will prepare documentation for despatch by Corus to Corus shareholders seeking their vote on the scheme under which their shares will be acquired by Tata Steel.

The necessary meetings are likely to be held around the end of February, and if the scheme is approved by the requisite 75 per cent majority, Tata Steel will then acquire full control of Corus, including the shares of any shareholders who did not vote in favour.

Is the suspense, therefore, over for Corus shareholders?

In terms of regulatory clearances, the deal will still be subject to clearance under the European Community Merger Regulation. But since I do not think Tata Steel has much in the way of existing business based in the EU, this is unlikely to be a real issue.

The possibility of a wildcard entry...

If a so-far undeclared bidder for Corus were now to emerge and offer more than 608 pence per share, Tata Steel and CSN would, as a regulatory matter, be free to increase their final offers in the auction even further. However, there has already been plenty of time for any third party bidder to emerge, so in practice I think this is unlikely.

What have been the key lessons from the deal for M&A watchers?

For M&A watchers, it shows how the pressure of an auction can see prices escalate. Remember Tata Steel's opening bid of 455 pence.

While the 608 pence now offered may be seen to be a full price (the market has marked the Tata Steel stock down today), Tata has secured itself an important strategic asset and is acquiring a significant European business that it would have taken years to build up from scratch.

Also, there is buoyant demand for steel, so with the benefit of hindsight, this deal could be seen as a smart strategic move for Tata.

Any takeaways for the legal profession?

On the regulatory side, we have another example of an auction process specified by the Takeover Panel. This clearly reflects detailed discussions with the parties and their advisers as it differs in the detail from the other auction procedures specified in other deals. However, the Panel's objective of providing an orderly framework for the resolution of the competitive situation, so that the bidding process does not continue beyond a reasonable time has been achieved.

D. Murali

More Stories on : Interview | Mergers & Acquisitions | Tata Steel Ltd | Steel

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