The Telegraph
Since 1st March, 1999
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Tit for Tata: It’s a bid war

London, Dec. 11: The bidding war between Tata Steel and its Brazilian rival, CSN, for Corus, the Anglo-Dutch group, took a dramatic twist this morning.

Late last night, the Tatas increased their offer for Corus from 455p to 500p a share, improving on CSN’s bid of 475p and delivering what it hoped would be a knockout blow.

This has been touted as corporate India’s biggest overseas acquisition.

But this morning, CSN came back with a better offer of 515p.

It remains to be seen if the Tatas will return with a second improved offer and the group did say today they were “considering their position”.

The management of Corus, which had spent a year negotiating the deal with the Tatas and had even recommended the 455p offer, today accepted the latest bid from CSN.

The Corus management has a duty to get the highest price for shareholders so if the Tatas really want Corus, Ratan Tata, who has headed the negotiations, will have to consider whether to find even more money.

The CSN bid, however, is conditional upon the Tata offer being either rejected by Corus shareholders or withdrawn by the Corus board or lapsing.

The Brazilians’ strong point is that they can supply cheap iron ore to Corus’s plants, whereas with the Tatas, the plan was to get the finishing-off process done in the UK.

CSN could have had Corus at a much lower price in 2003 or even earlier this year when it failed to conclude an agreement with the Anglo-Dutch group. It was only the entry of the Tatas that has made it desperate to acquire Corus at almost any price.

Benjamin Steinbruch, chairman and chief executive of Companhia Siderurgica Nacional (CSN), said today: “The strategic impetus for this combination is growth —growth in Brazil, in Europe and for our combined workforces. Our goal is to unlock the value of our iron ore assets through Corus, transforming them into cost-effective, high-quality steel products using Corus’s advanced engineering capabilities and its excellent European distribution platform. This is a winning combination for all stakeholders.”

Jim Leng, chairman of Corus who backed Tata Steel only last night, changed his mind this morning and supported CSN.

“This offer is both higher than the initial proposal by CSN as well as the revised Tata offer of 500p a share,” he pointed out. “It is also consistent with our strategic objective of securing access to raw materials, low-cost production and growth markets.”

CSN is now putting the total value of Corus shares at £4.9 billion, compared with the Tatas’ £4.7 billion. The deal is worth more when payments into pension funds as well as Corus’s debts are taken into account. For CSN, this will amount to about £5.8 billion — effectively the figure the Tatas will have to exceed if they want Corus.

Last night, Tata said: “We remain convinced of the compelling strategic rationale of this partnership and the revised terms deliver substantial additional value to Corus shareholders.”

There was also endorsement from Leng.

In trading today, Corus was up 28p to 528p.

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