Calcutta, Nov. 24: Brazilian steelmaker Companhis Siderurgica Nacional (CSN) and its cohorts have been scooping up Corus shares from the market and have cornered close to 20 per cent of the Anglo-Dutch company’s stock even as they hunker down for a gripping bidding war with the Tatas.
The stakeout could present a serious threat to the Tatas whose offer of 455 pence per share was trumped on November 17 by CSN, which offered 20 pence more per share valuing its bid at $8.3 billion.
Global financial powerhouses UBS and Goldman Sachs Group — who are advisers to CSN — said in a filing with the London Stock Exchange last night that they now hold 7.36 per cent and 4.01 per cent respectively in the Anglo-Dutch steel company.
On November 17 — just hours before CSN indicated that it would be submitting a counter-bid — Supernova Acquisition Ltd, a CSN group subsidiary, picked up a little over 13 million shares and raised its holding to 34 million shares.
This has given CSN a 3.8 per cent stake in Europe’s second largest steelmaker.
Barclays, which is part of the banking syndicate that is financing CSN’s bid, holds another 4.7 per cent. As a result, CSN and its allies hold close to 20 per cent.
When contacted, a CSN spokesperson, however, said holdings of UBS, Barclays and Goldman could not be clubbed together.
“Their stake is part of their asset management business,” she added.
The Tatas and their associates have no significant holdings in Corus. The development assumes importance since Tata Steel has made its offer conditional upon garnering the support of 75 per cent of Corus voting rights.
If CSN is able to woo any of the other big investors like Lehman Brothers or Standard Life and create a block over 25 per cent, the Tata offer will run into serious trouble.
If CSN just matches Tata’s enhanced bid, it will be able to defeat the Indian company as its associates will vote against the Tatas. It can be recalled that Standard Life had sharply reacted to the Tata offer of 455 pence per share saying it was too low. However, it remains to be seen whether Goldman Sachs, UBS and Barclays stick to CSN if the Tatas manage to outbid the Brazilian contender.
“As AMCs, they have responsibility to stakeholders who park their money with them. They cannot simply ignore a higher bid and stick to CSN because they are advising/financing it,” an expert said.
Thus, it is now almost a certainty that the Tatas would have to outbid CSN if they hopes to grab Corus. The pundits said it was no longer enough to just match the CSN bid and secure a recommendation from the Corus board.
Both Goldman Sachs and UBS have steadily upped their stake in the past month before and after CSN approached the Corus board with a 475-pence- per-share offer.
They bought the shares at a price of close to 500 pence, clearly indicating that they were making an outflanking move against the Tatas. The Corus stock hasn’t traded below 495 pence since CSN made its intentions known.
UBS held 4.08 per cent of the Corus stock on October 26, which rose to 6.19 per cent on November 6 and now stands at 7.36 per cent. Goldman Sachs Group has also stepped up its holdings in the last few weeks.
The Tata Steel board met yesterday to take stock of the situation arising from CSN’s counter-bid. Even though it denied that any decision have been taken on a higher bid, reports suggest they would consider such an option and try and push ahead with what is touted to be India Inc’s largest overseas acquisition.
Sources say the Tatas would prefer to play a waiting game. Although the Tatas may raise the bid by another $1 billion, this will only be done after CSN stumps up a formal offer.
Investment banking sources said the Tatas were likely to first match the offer made by CSN.
This will tilt the balance slightly in their favour as they have already won the approval from Corus on October 20 for their proposal to create the world’s fifth-largest steelmaker. There are indications that the Tatas may seek a firm commitment of support from Corus if they decide to raise the bid.
Under the City Code of Takeovers and Mergers of UK, the Corus board can recommend only one offer. If Corus backs the CSN bid, it will have to pay a separation fee to the Tatas.