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D. Murali

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Chennai Feb. 1 Press release of Companhia Siderúrgica Nacional (CSN) datelined `Rio de Janeiro/ São Paulo, January 31' announces glumly, "The auction outcome announced yesterday by the Takeover Panel: CSN offered 603 pence in cash for each common share of Corus' capital stock and Tata, on its turn, offered 608 pence for each common share of Corus, thus, being the winner in the auction held yesterday."

The following things are expected to occur, says CSN: One, CSN will be entitled to sell 34,072,613 shares of Corus' capital stock by the reviewed final price offered by Tata; and two, as set forth in the agreement for implementation entered into between CSN Acquisitions and Corus on December 10, 2006, CSN Acquisitions will be entitled to receive from Corus the `Incentive Remuneration' corresponding to 1 per cent of the reviewed final price proposed by CSN Acquisitions for the acquisition of the company.

As you may remember, it was CSN's subsidiary `CSN Acquisitions Limited', which participated in the auction run by the UK Takeover Panel that took place on January 30, 2007, `where both CSN and Tata Steel UK Limited reviewed their respective takeover bids on Anglo-Dutch steelmaker Corus Group plc.'

A case where the loser also stands to gain, though in CSN's case the amount may be substantial - at close to half a billion dollars, as being reported in the media.

The 64-page `Information Document relating to the Recommended Pre-Conditional Cash Acquisition' on www.corusgroup.com uses a different phrase - `Inducement Fee'.

This is explained in `definitions' thus: "1 per cent of the value of the Acquisition calculated by reference to the price per Corus Share and the fully diluted share capital of Corus, together with an amount equal to any VAT (value-added tax) which is recoverable by Corus (if applicable)."

The phrase `inducement fee' is the title of a whole section in the document, which begins thus: "As a pre-condition to CSN Acquisitions agreeing to announce the proposed Acquisition, Corus has agreed in the Implementation Agreement to pay the Inducement Fee to CSN Acquisitions."

The fee is subject to the following condition: That "after the announcement of the Scheme, the Acquisition is withdrawn or lapses (whether or not the Pre-Condition has been satisfied at the time of such withdrawal or lapse) without becoming unconditional in all respects (`Acquisition Failure'), save that Corus and CSN have agreed that any such withdrawal or lapse that would not have occurred but for there being any legal or regulatory issues concerning the Pre-Condition forming part of the proposed Acquisition structure shall not constitute Acquisition Failure."

Further contingencies, which the document speaks of, to necessitate the payment of inducement fee are: "(i) prior to the time of such Acquisition Failure, the Corus Directors (as constituted for this purpose in accordance with the Code) either (a) do not unanimously recommend the Acquisition to Corus Shareholders (other than where such failure to unanimously recommend is because the Acquisition has been withdrawn or lapsed by reason of a condition set out in Part II of Appendix I of this announcement being invoked); or (b) having made such a recommendation, withdraw or adversely modify it; or (ii) (in the case where the Pre-Condition has been satisfied and the Acquisition is being made by way of the Scheme) following the resolutions to be proposed at each of the Court Meeting and the EGM having been passed by the requisite majorities the Corus Directors do not, in breach of the Implementation Agreement or because their fiduciary duties require them not to do so, seek the Scheme Court Order at the Scheme Hearing; or (iii) prior to the time of Acquisition Failure, a public announcement of an Alternative Proposal is made and subsequently (whether before or after the Acquisition Failure) such Alternative Proposal is declared unconditional in all respects, becomes effective or otherwise completes."

Well, all that may require legal interpretation, for most of us. But here is a clarification that should be understandable: "Nothing in the Implementation Agreement obliges Corus to pay any amount, calculated on the date on which the Inducement Fee becomes due for payment, which either (i) the Panel determines would not be permitted by Rule 21.2 of the Code or (ii) is in excess of that which is permitted to be paid, without the prior approval of Corus shareholders, pursuant to rule 10.2.7R of the Listing Rules of the UKLA (the `Permitted Inducement Fee Amount')."

And there's more: "Further, Corus, CSN and CSN Acquisitions agree that if the aggregate amount of any inducement fee payable to CSN and any inducement fee paid to Tata exceeds the Permitted Inducement Fee Amount, then the Inducement Fee will be reduced to an amount equal to the Permitted Inducement Fee Amount less the amount of any inducement fee paid to Tata."

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

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