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Off-key in Tata Steel Corus

Calcutta, Oct. 20: The Corus board may have cleared the Tata offer but it has failed to impress the major shareholders of Europe’s second largest steel maker.

Standard Life Investment, which now holds a 7.9 per cent stake in Corus, has signalled its disappointment at the 455 pence a share offer, stopping short of saying whether it would tender its shares at all.

“The 455p per share offer by Tata for Corus is lower than we would have expected the board of Corus to agree to and recommend,” a spokesperson of the company told The Telegraph from London.

It added that the trading performance of Corus has been very strong and produced very attractive cash flows which could be worth more than the current price being offered by Tata.

“The acquisition of Corus brings many advantages to Tata, including elevating it to the top five global steel producers, and an as-yet unquantified amount of synergy benefits. The 455p per share offer from Tata does not attribute significant value to Corus.”

Earlier in the day, Tata group chairman Ratan Tata refused to comment on whether Tata Steel would raise bid price further.

The 455p offer, which is at a discount to the current market price, is already costing Tata Steel a whopping $10 billion and any increase would further stretch the Indian steelmaker.

The Tata Steel offer is subject to a minimum acceptance of 75 per cent of shareholders.

Ten per cent of Corus shareholders are individuals and the rest are institutions.

Standard Life’s response may keep a window open for a possible counter-bid even as the Corus management has agreed not to consider any.

As a result possible attempts from Brazilian CSN or Russian Severstal would be considered hostile.

The agreement says Corus will not solicit, encourage, initiate or otherwise seek to procure any competing proposal, or enter into or participate in any discussions or negotiations or correspondence relating to any competing proposal.

However, Corus can respond to “unsolicited enquiries” from third parties to the extent that the Corus directors consider that they would be in breach of their fiduciary duties not to do so.

Corus has also agreed to inform Tata Steel UK, promptly of any approach received from a third party relating to a competing proposal, including the material terms.

Top Tata management declined to be drawn into the controversy if it was willing to pay more if a counter-bid comes.

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