Calcutta, Jan. 9: When no one was looking and all eyes were rivetted on the battle for Hutchison Essar, a quiet development in the Corus saga has added a new twist to the other takeover battle: 47 million new shares (or almost 5 per cent of the equity) have been created in the past month through a sudden conversion of bonds that were issued over three years ago by the Anglo-Dutch steel maker.

The 3 per cent guaranteed convertible unsubordinated bonds that Corus had issued in 2003 did not carry any voting rights. They were due to mature on or before January 11 this year.

The bondholders had the option to convert into shares on or before December 28, 2006. But most bondholders did not rush to convert till December 11 after the Tatas revised their earlier offer of 455 pence to 500 pence, only to be topped by Brazilian rival, Companhia Siderurgica Nacional (CSN), which came up with a 515 pence bid within hours of the Tata offer.

The back-to-back offers set the Corus stock, which was rising from early October after the Tatas made their intentions public, on fire.

Bondholders decided to cash in on the opportunity and started converting their holdings into Corus stock.

The creation of the new stock could play the same role as a swing vote in a tight election. Both the Tatas and CSN will now need to rework their strategies.

The conversion to stock from bond does not, however, mean any proportionate rise in bidding cost by either Tata or CSN as both companies would offer enterprise value, which include both debt and equity, for Corus.

But the creation of the new voting rights will certainly play a crucial role in case of photo finish between two bidders.

John Bennett, head of corporate law at London-based law firm Berwin Leighton Paisner (BLP), said it was possible that the Corus board would put both offers to vote.

This may happen “in the event that the board does not make a recommendation because the offers (by Tata and CSN) are on exactly the same terms,” said Bennett.

The Tatas had opted to mount their bid through a Corus management-backed scheme of arrangement. The Indian steel maker had decided that its bid would succeed only if 75 per cent of the voting rights went in its favour.

CSN has now topped the Tata offer and, willy nilly, secured the support of the Corus management for its scheme of arrangement.

The Tatas can re-categorise their bid as a takeover offer and cut the acceptance floor to 50 per cent.

CSN and its financial advisers like UBS AG, Barclays and the Goldman Sachs Group now hold more than 20 per cent of Corus voting rights.

If both offers are put to vote, the CSN advisers will almost certainly back the Brazilian steelmaker.

In such a situation, these new shares could become a crucial deciding factor to determine who will win Corus.