The Tatas raised the offer to acquire Corus and the board of the Anglo-Dutch steelmaker recommended the higher bid to shareholders.
HS Rao
LONDON/MUMBAI: The Tatas on Monday raised the offer to acquire the Corus Group Plc to $9.2 billion, from $8.1 billion. The Board of the Anglo-Dutch steelmaker recommended the higher bid to shareholders.
Tatas' revised bid of 500 pence per Corus share comes as a surprise ahead of rival Brazilian bidder CSN's formal offer.
The Rio de Janerio-based firm had last month announced it would make a counter offer of 475 pence, compared to the Indian corporate's original offer of 455 pence.
Tata Steel Chairman Ratan Tata said, "We remain convinced of the compelling strategic rationale of this partnership and the revised terms deliver substantial additional value to Corus shareholders."
Corus Chairman Jim Leng said: "The Revised Acquisition terms from Tata Steel are a substantial increase from the previous offer. Accordingly, the Corus Board are pleased to recommend this to Corus shareholders."
The Tatas said, "Tata Steel is pleased to announce it has agreed to an increased recommended acquisition at a price of 500 pence in cash per Corus share."
The terms of the revised takeover bid value the entire existing issued and to be issued share capital of Corus at about 4.7 billion pounds ($9.2 billion), it said, adding that after acquisition the Tatas would explore all strategic alternatives to manage its financial exposure and enhance it through additional synergies.
The additional funds were committed through two letters of credit agreements entered this month between Tata Steel and its subsidiary Tata Steel Asia Holding Plc with Standard Chartered Bank and Standard Chartered First Bank of Korea.
The Indian corporate giant's revised bid, which is higher by 10 per cent than its original offer, puts the enterprise value of Europe's second largest steelmaker at 5.7 billion pounds ($11.1 billion), including debt.
The new offer means a premium of about 38.7 per cent to the average closing mid-market price of 360.5 pence per Corus share for the 12 months ended October 4, 2006, the last trading day prior to the announcement by Tata Steel.
Corus had last month recommended to its shareholders Tata's original offer of 5.1 billion pounds, including debt, but it postponed its extra-ordinary general meeting scheduled for December 4 to December 20 to give Brazil's Companhia Siderurgica Nacional more time to make a formal offer.
CSN, however, has not made a formal counter-offer so far.
The Tata Steel Board had met on November 23, shortly after CSN announced its counter-offer, pending a formal bid. Tata Steel, though maintained silence on its Board meeting, was presumed to have communicated to Corus it would match the CSN bid, provided it was supported by Corus Board.
The Board of Corus met on Sunday and decided to recommend the revised offer of Tata Steel to shareholders.
Tata Steel's acquisition of Corus would make the merged entity the world's fifth-biggest steel producer with output of about 23 million tonnes of steel a year.
Tata Steel produced more than five million tonnes in 2005-06, while Corus producing around 18 million tonnes.
Coinciding with the revised offer, Tata Steel announced it will continue to focus on its greenfield projects in India.
"While the Orissa and Chhattisgarh projects are expected to be completed to their full potential, the Jharkhand project would be implemented up to the first two phase of six million tonne capacity," the company said.
As per the revised offer, Corus shareholders will get 500 pence in cash for each share. This represents a price of 1,000 pence in cash for each Corus ADS.
Corus shares closed at 500 pence on Friday on the London Stock Exchange.
The European firm, which has postponed its EGM to December 20, would shortly advise its shareholders on further details of the new offer.
The Corus directors, representing about 0.1 per cent of the share capital of Corus, unanimously recommended that shareholders vote in favour of the revised acquisition.
Besides Standard Chartered, Tatas' financial advisers ABN AMRO and Deutsche Bank have communicated that sufficient funds were available to finance the revised acquisition offer.
The revised value is based on the fully diluted number of Corus shares being 946,703,281, including 898,743,330 shares in issue on December 8, 2006. This includes those shares represented by ADSs, but excludes those held in treasury.
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