The Tata bid for Anglo-Dutch steelmaker Corus may get a formal nod on Friday. But spoiler bid by Brazil company is not ruled out.
But spoiler bid by Brazil company is not ruled out
MUMBAI/LONDON: From all indications, the Tata bid for Anglo-Dutch steelmaker Corus may get a formal nod on Friday. While no one is ruling out last-minute spoiler bids from Brazilian or Russian companies, the board of Corus has reportedly recommended Tata Steel’s offer to buy 100% of the company, possibly with some modifications on the 455-pence-a-share all-cash offer which values Corus at over $ 10 billion.
With the Tata Steel board scheduled to meet in London on Friday, the two companies are expected to make a joint statement on the deal later in the day.
The Corus board’s move to give the green signal to Tata Steel could queer the pitch for the other prospective bidders. The Tatas are said to be on a strong wicket because they have been quick off the mark and appear to have done their homework well. Moreover, they also appear to have won the confidence of the Corus management, an important prerequisite for getting on board the world’s eighth largest steelmaker.
Joining Tata Steel’s ‘A’ team in London as they work out the finer details is Ratan Tata, chairman of the Tata group. He is expected to join the senior management of Tata Steel in London on Friday, say sources close to Bombay House.
The chairman of the US $22 billion group is currently in Japan along with other members of the investment commission constituted by the the Prime Minister.
Tata, who apparently hit it off with James Leng, chairman of Corus, after their first meeting in July, may have planned a masterstroke by getting a special purpose vehicle created by Tata Steel to merge with Corus and thus control the reins of the Anglo-Dutch steelmaker.
The positive recommendation by the Corus board in a rapid-reflex action soon after the Tata Steel offer was made public suggests that there was some kind of basic nod-and-wink agreement in place even before. It also gives credence to speculation that the Corus board may have wrested some concessions, including access to cheaper raw materials, and assurances to go easy on manpower rationalisations.
For Tata Steel, Corus would open up newer markets and customers in Europe. It will give them the latest technology in making high-tech carbon steel, among other things.
The persistent speculation that foreign steelmakers from Russia and Brazil may queer the pitch is yet to materialise. “As of this morning the counter-bid by Brazilian steel company Cia Siderergica Nacional (CSN) for Corus is still a rumour. No firm bid has come in as yet, but it looks as if they are moving into position,” says Raju Deswani, steel industry analyst and global publisher of Metal Bulletin.
The publication had put out an article saying that a counter-bid to the Tatas for Corus was in the offing.
“This is quite normal in such a situation. Whenever a bid is made for a company it opens up the field for others, too,” Deswani explained.
The Corus share revived to levels of 487 pence from 476 pence on the day Tata Steel revealed its 455 pence cash offer for a full takeover of the European steel producer.
Novolipetsk and Severstal, two Russian steel companies, and CSN, a Brazilian steelmaker, are being touted by steel industry observers as likely contenders.
So far, the Tatas have the upper hand. The group’s record on corporate governance can be compared to the best in the world. Further, they have a history of retaining the top management and employees of companies they acquired.
The workers’ union of Corus, Community, has demanded that Tata should commit to further investment in the steelmaker’s UK operations as part of the deal. Community represents 80 % of Corus employees and has urged that jobs, pay and pensions are also guaranteed.
“Community would expect Tata to commit to further much-needed investment in Corus’ UK operations as part of the terms of any takeover deal. In addition, we would also expect there to be guarantees on the terms and conditions of employment for Corus’ UK employees, particularly on pay and pensions,” said Michael Leahy, general secretary of Community.
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